Finance
3 stocks that will give you a check every month
Most companies pay their dividends on a quarterly, semi-annual or annual basis. However, these payments may be too little for investors who want to retire or live off their dividend income.
For those investors, monthly dividend payers may be more attractive. Real estate income (NYSE:O), LTC properties (NYSE:LTC)And Gladstone Investment (NASDAQ: PROFIT) all provide monthly income with minimal drama.
1. Real estate income
Realty Income is one of the largest real estate investment trusts (REITs) in the world. REITs buy many properties, rent them out and share the rental income with their investors. US REITs are also required to distribute at least 90% of their taxable income as dividends to maintain a favorable tax rate.
Realty Income owns approximately 15,450 properties worldwide, and its top tenants include resilient retailers such as Walgreens Boots Alliance7-Eleven, Dollar general, Dollar treeAnd Walmart. Some of these tenants have faced severe macroeconomic headwinds, but Realty Income has consistently maintained occupancy rates above 96% for the past thirty years.
The company has paid consecutive monthly dividends since its founding in 1969 and has increased its payout 126 times since its initial public offering in 1994. It currently pays a monthly dividend of $0.2625 per share, which translates to an annual yield of 5.2% . It also still looks cheap at 15 times per-share adjusted operating funds, which is comparable to cash flow for a REIT.
Like many REITs, Realty Income’s valuations have been negatively impacted by high interest rates over the past two years. But with interest rates about to fall, this could happen great time to charge these evergreen income stocks to generate stable monthly dividends.
2. LTC features
LTC Properties is another REIT. But unlike Realty Income, LTC invests primarily in senior housing and healthcare in the US. Both markets have grown as the U.S. population ages. The portfolio currently includes 115 assisted living facilities, 78 skilled nursing facilities and five other types of facilities.
LTC’s focus on seniors naturally protects LTC from economic downturns and makes it a more conservative play than retail or commercially oriented REITs. It maintained stable occupancy rates above 83% and 75% for its assisted living and skilled nursing facilities, respectively, in the first quarter of 2024.
LTC pays a monthly dividend of $0.19, which equates to an annual forward yield of 6.4%, and trades at just 12 times forward earnings. That high yield and low valuation should limit LTC’s downside potential, but it likely won’t attract too many buyers until interest rates finally drop and it becomes easier for the company to acquire new properties. That said, it’s still a safe place to park your money, earn higher returns than most CDs and T-bills, and take advantage of the growing needs of an aging population.
3. Gladstone investment
Gladstone Investment is a business development company (BDC) offering loans primarily to smaller, mid-sized and mature businesses. Like REITs, BDCs are required to distribute at least 90% of their taxable income as dividends to their investors. They must also invest 70% of their assets in U.S. companies valued at less than $250 million.
Gladstone typically invests up to $75 million in debt and equity per deal. It typically looks for companies with experienced management teams, proven business models, stable customer relationships and adjusted annual earnings before interest, taxes, depreciation and amortization (EBITDA) of $4 million to $15 million. The portfolio consists of twenty companies in the consumer services, consumer products and manufacturing sectors.
Gladstone pays a monthly dividend of $0.08 per share, which translates into an annual yield of 7.6%. At less than $13, it trades at a discount to its $13.43 in net assets per share (at the end of Q1 2024) and 11 times its forward earnings. It trades at such low valuations because high interest rates make it harder to offer loans at favorable rates. But if interest rates fall, profitability should improve and allow the country to pay out higher benefits. So for now, it’s a fairly safe way to collect hefty monthly payments until the macro environment stabilizes.
Should you invest €1,000 in real estate income now?
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Leo sun has positions in Realty Income. The Motley Fool holds positions in and recommends Realty Income and Walmart. The Motley Fool has one disclosure policy.
3 stocks that will give you a check every month was originally published by The Motley Fool
