Farran Powell
Farran Powell
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Published 3:46 p.m. UTC Feb. 13, 2024
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Monthly dividend stocks can be an excellent source of income for investors, especially during retirement.
“Returning cash to shareholders is a direct reflection of the health of the business and demonstrates tangible value,” says Owen Murray, director of investments for Horizon Wealth Advisors.
Monthly dividend stocks can be particularly attractive to people who rely on those payouts as part of their monthly budget.
We selected the the best monthly dividend stocks of 2024 based on the following factors: Wall Street “buy” consensus, market capitalization, a payout ratio of less than 100% and a dividend yield of greater than 2.7%.
Best monthly dividend stocks
- Main Street Capital (MAIN).
- Prospect Capital (PSEC).
- Paramount Resources (POU.TO).
- Gladstone Investments (GAIN).
- LTC Properties (LTC).
Main Street Capital (MAIN)
Sector
Financial services
Market cap
$3.2 billion
Year-to-date (YTD) performance
6%
What you should know
Main Street Capital is a business development company, or BDC. The company provides long-term debt and equity capital to lower middle-market companies, supporting management buyouts, growth financings, recapitalizations and acquisitions. Main Street has 195 cumulative investments and ended its first quarter of 2023 with $1.4 total assets under management.
Main Street went public in 2007 at a share price of $15. In less than 16 years, the stock has paid out an impressive $37.56 per share in cumulative dividends.
Main Street pays a monthly dividend of 23 cents per share, with an annual yield of 6.9%. The company also generated $81 million in net investment income in the first quarter, or about $1.02 per share.
Pros and cons
Pros
- Attractive 10.4 forward earnings multiple.
- Impressive revenue growth in 2022.
- Raised dividend payout in 2023.
Cons
- Operating expenses increased 12% in 2022.
- Net income dropped 26.9% last year.
- Fee income dropped year over year in the first quarter.
More details
- P/E: 12.
Prospect Capital (PSEC)
Sector
Financial services
Market cap
$2.6 billion
YTD performance
-8%
What you should know
Prospect Capital is another leading public BDC with a diversified portfolio of investments. Prospect lends to and invests in private, middle-market companies. Prospect has a long history of consistent monthly dividend payouts. The company has made roughly $4 billion in cumulative dividend payouts since its 2004 initial public offering (IPO), and Prospect has declared 72 consecutive monthly payouts of 6 cents per share. At its current share price, that dividend represents an extremely attractive 11.2% yield.
Prospect also mitigates risk by focusing on senior and secured lending. The majority of the company’s total investments are loans secured by a first lien or other secured debt, meaning the debt is backed by collateral.
Prospect reported $106.7 million in net investment income (NII) in the most recent quarter.
Pros and cons
Pros
- Reported 24.7% NII year-over-year growth in the fourth quarter of 2022.
- Extremely attractive 11.2% dividend yield.
- A long history of consistent monthly dividend payouts.
Cons
- Net asset value per common share was down 6.2% year over year in the fourth quarter.
- Net income dropped on an annual basis last quarter.
- No dividend hike since 2015.
More details
- P/E: N/A.
Paramount Resources (POU.TO)
Sector
Energy
Market cap
$3.1 billion
YTD performance
18%
What you should know
Paramount Resources is a Canadian natural gas company with gas-producing properties in Alberta and British Columbia. Last year, the company achieved record annual sales volume.
The Calgary-based company has a low and conservative payout ratio of just 26%. It’s good to remember, however, that cash flow is typically more important than profit for assessing dividend sustainability. That’s why it’s essential to check whether a company can generate enough cash to support its dividend.
Paramount Resources pays a monthly dividend of 10 cents per share, which comes to an annual yield of 5.1%.
Pros and cons
Pros
- A payout ratio under 30%.
- An attractive forward multiple of about 10.
- Revenue is forecast to grow 7.4% annually over the next two years.
Cons
- A relatively small monthly dividend.
- Operations in the Grande Prairie and Kaybob regions were suspended because of the May wildfires.
- Exposed to foreign currency exchange risks.
More details
- P/E: 5.
Gladstone Investments (GAIN)
Sector
Financial services
Market cap
$439 million
YTD performance
1%
What you should know
Gladstone Investment is a private equity fund that provides both equity and debt capital to mature, middle-market companies with strong management teams and attractive business fundamentals. The company has invested more than $1.6 billion since its 2005 IPO.
Gladstone has a diversified portfolio that includes 25 companies across 19 U.S. states and 14 industries. Its current portfolio has roughly $772 million in total assets, as of the end of 2022.
The company has averaged a 14% return on equity (ROE) in the past five years, outpacing the 9% ROE of its industry peers. The stock pays a 12-cent monthly dividend, representing an annual yield of 7.4%.
Pros and cons
Pros
- Double-digit five-year return.
- Raised regular monthly distributions in 2022.
- Large equity investment stakes provide an opportunity for supplemental distributions from capital gains.
Cons
- ROE has declined sharply since mid-2021.
- Slightly negative overall revenue growth over the past three years.
- Just 2.2% insider ownership and 15.1% institutional ownership.
More details
- P/E: 9.
LTC Properties (LTC)
Sector
Real Estate
Market cap
$1.3 billion
YTD performance
-10%
What you should know
LTC Properties is a real estate investment trust (REIT) that owns and operates senior housing and health care properties. The company’s portfolio consists of 218 total properties. About 62% of its properties are assisted living facilities, and about 35% are skilled nursing facilities.
The company’s leading operator partners include Prestige Healthcare, ALG Senior Living, Brookdale Senior Living and Anthem Memory Care. Those top four partners operate around 40% of LTC’s properties combined.
LTC’s net income was up about 130% year over year in the first quarter. The stock’s 19-cent monthly dividend represents a 6.89% yield.
Pros and cons
Pros
- Net income was up 130% year over year in the first quarter.
- Funds from operations were up annually in Q1.
- An aging U.S. population should support senior facility demand over time.
Cons
- The available line of credit liquidity is down sharply from 2020.
- The three-year total return lags the S&P 500.
- No dividend hike since 2016.
More details
- P/E: 11.
Compare the best monthly dividend companies
| COMPANY | SECTOR | MARKET CAP | YTD PERFORMANCE |
|---|---|---|---|
Main Street Capital (MAIN) | Financial services | $ 3.2 billion | 6% |
Prospect Capital (PSEC) | Financial services | $ 2.6 billion | -8% |
Paramount Resources (POU.TO) | Energy | $3.1 billion | 18% |
Gladstone Investment (GAIN) | Financial services | $439 million | 1% |
LTC Properties (LTC) | Real estate | $ 1.3 billion | -10% |
Methodology
The best monthly dividend stocks included above all trade on either a major U.S. stock exchange or the Toronto Stock Exchange and meet the following criteria:
- Consensus analyst recommendation of “hold” or better. A high number of analyst “buy” and “hold” ratings indicate an expectation the stock will meet or exceed the performance of the overall market.
- Market capitalization of at least $50 million. Stocks with market caps below $50 million are considered nanocap stocks, and they are often among the most volatile and risky stocks listed on major exchanges. Stocks with market caps above $50 million are likelier to have analyst and media coverage and plenty of trading liquidity.
- Payout ratio under 100%. The payout ratio is the percentage of a company’s profits that is committed to dividend payments. Companies with payout ratios above 100% are at higher risk of cutting or eliminating their dividends.
- Dividend yield of at least 2.7%. Investors looking for monthly dividend income are likely looking for a yield that is substantially higher than the market average. Stocks with a dividend yield of 2.7% or higher have payouts that are more than a percentage point higher than the S&P 500 average yield of 1.64%.
Why other stocks didn’t make the cut
Just because a stock pays a monthly dividend or has a high yield doesn’t necessarily make it a good investment.
“Focusing only on dividends can limit the opportunity set only to companies that pay dividends, such as utilities and consumer staple stocks, while missing out on the opportunity to own growth company stocks that may not pay a dividend but have greater return potential,” Murray says.
If a company does not have strong underlying business fundamentals, a monthly dividend may not be enough to offset its falling stock price. There are plenty of stocks with extremely high monthly dividend yields that may be unsustainable if those companies’ payout ratios are too high or are steadily rising.
Final verdict
Dividend stocks have plenty of pros for investors, such as providing stability during periods of elevated stock market volatility.
Main Street Capital pays the highest dividend per month and holds the highest capitalization among our list of the best monthly dividend stocks,
Why invest in monthly dividend stocks?
Monthly dividend stocks can be an excellent source of steady income for a retired investor or someone looking to supplement a monthly paycheck. In addition, investors can take advantage of compounding returns by reinvesting their dividends back into the stocks that pay them.
There’s nothing inherently better about monthly dividend stocks compared to quarterly dividend stocks, but investors who prefer a more consistent, steady source of income may prefer monthly payouts.
And if you’re looking for a selection of our best dividend stocks, you can review those suggestions right here:
- Best dividend stocks to buy
Frequently asked questions (FAQs)
Yes, high-quality monthly dividend stocks can provide a steady stream of income and potentially generate share price upside over the long term. Monthly dividend stocks can be particularly attractive to retirement investors or investors looking to supplement their monthly paychecks.
Monthly dividend stocks tend to payout relatively small dividends per month. Say you own a stock that costs $10 per share with a 10-cent monthly dividend. You’ll need to own at least $100,000 in shares to reach that $1,000 threshold per month.
Investing in monthly dividend stocks is no different from investing in any other public stock: You simply open up a brokerage account and purchase shares of your preferred dividend stocks. Your dividends will be deposited directly into your brokerage account automatically on each company’s monthly dividend payment date.
Blueprint is an independent publisher and comparison service, not an investment advisor. The information provided is for educational purposes only and we encourage you to seek personalized advice from qualified professionals regarding specific financial decisions. Past performance is not indicative of future results.
Blueprint has an advertiser disclosure policy. The opinions, analyses, reviews or recommendations expressed in this article are those of the Blueprint editorial staff alone. Blueprint adheres to strict editorial integrity standards. The information is accurate as of the publish date, but always check the provider’s website for the most current information.
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Wayne Duggan is a regular contributor for Forbes Advisor and U.S. News and World Report and has been a staff writer for Benzinga since 2014. He is an expert in the psychological challenges of investing and frequently reports on breaking market news and analyst commentary related to popular stocks. Some of his prior work includes contributing news and analysis to Seeking Alpha, InvestorPlace.com, Motley Fool, and the Lightspeed Active Trading blog. He’s the author of the book "Beating Wall Street With Common Sense," which focuses on practical investing strategies to outperform the stock market. He resides in Biloxi, Mississippi
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Farran Powell is the lead editor of investing at USA TODAY Blueprint. She was previously the assistant managing editor of investing at U.S. News and World Report. Her work has appeared in numerous publications including TheStreet, Mansion Global, CNN, CNN Money, DNAInfo, Yahoo! Finance, MSN Money and the New York Daily News. She holds a BSc from the London School of Economics and an MA from the University of Texas at Austin. You can follow her on Twitter at @farranpowell.
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