Top 10 Dividend Stocks That Pay Monthly
In this article, we present the list of the top 10 dividend stocks that pay monthly. Click here to go ahead and see the top 5 dividend stocks paid monthly.
Dividend stocks are a valuable addition to any portfolio, even in the best of market conditions, and provide a consistent source of income for your investments that can then be reinvested or otherwise used. However, their usefulness shows in difficult or stagnant times in the market, when dividends make up a larger portion of the market's total return.
Investors will be surprised at how much of the total returns on the S&P 500 comes from dividends, although the amount has declined over the past few decades due to the surge in growth stocks. According to Hartford Funds, a whopping 73% of the total returns on the S&P 500 were due to dividends in the 1970s, up from 42% between 1930 and 2017.
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Of course, if market conditions are poor, it could mean that numerous companies are also in financial danger, which could also jeopardize these dividend payments. This was certainly the case in the pandemic-ravaged 2020, as companies large and small were forced to cut or permanently suspend their dividend payments.
In some cases, those moves have put an end to long-running rather than declining dividend payments, as in the case of Royal Dutch Shell plc (NYSE: RDS), one of the top 10 dividend stocks to buy according to billionaire Ken Fisher, but which is his first this year Times since 1945 has been forced to lower its dividend.
Same goes for monthly paid dividend stocks, which are a much smaller subset of dividend stocks and which are typically stocks whose main selling point is their consistent and high-yielding dividend payments to investors. Of the fewer than 60 companies paying monthly dividends, some have had to suspend their dividends entirely due to the pandemic, including EPR Properties (NYSE: EPR), Chatham Lodging Trust (NYSE: CLDT), and Apple Hospitality REIT Inc (NYSE: APLE).
Several others had to cut their dividends this year to respond to the challenging market environment, including some of the top monthly dividend stocks on this list, compiled based on the hedge fund ownership of each dividend stock paid monthly.
The reputation of hedge funds as savvy investors has been tarnished over the past decade as their hedged returns have not kept up with the unhedged returns of market indices. That doesn't mean there isn't money to be made from their consensus stocks. Our research has shown that small-cap stocks in hedge funds hit the market by double digits annually between 1999 and 2016, but the margin on outperformance has declined in recent years. Even so, we were able to identify a select group of hedge fund holdings in advance that have outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (see details here). We were also able to pre-identify a select group of hedge fund holdings that had underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly, the underperformance margin of these stocks has increased in recent years. Investors who have been in the market for a long time and sell these stocks would have achieved an annual return of more than 27% between 2015 and 2017. We have been tracking and sharing the list of these stocks in our quarterly newsletter since February 2017.
Now let's take a look at the top 10 dividend stocks that pay monthly, starting with Dynex Capital Inc (NYSE: DX). Please note that all hedge fund data is based on the exclusive group of over 800 funds that Insider Monkey pursues as part of our market investment strategy.
10. Dynex Capital Inc (NYSE: DX)
Dynex Capital Inc (NYSE: DX) launches our list of the top 10 dividend stocks that pay monthly and are owned by 8 hedge funds as of September 30th, including several of the major quant funds.
The mortgage REIT, which manages a diversified fixed income portfolio of assets, pays out a monthly dividend of $ 0.13, which is currently an annual return of 8.68%. This is well below the stock's five-year average dividend yield of over 12%, partly due to the dividend being cut twice in the past 18 months.
9. Broadmark Realty Capital Inc. (NYSE: BRMK)
Broadmark Realty Capital Inc. (NYSE: BRMK) stocks were owned by 11 hedge funds as of September 30, a decrease of 35% year-over-year. Hedge funds may have sold in response to the construction lender cutting its dividend payments 33% from January 2020, followed by another 25% decline from April.
Broadmark currently pays a monthly dividend of $ 0.06. The next payment will be made on January 15, 2021, for which the ex-dividend day is December 30. The stock's annual return is around 7%, compared to about 15% in March when BRMK shares traded for just $ 5.82 alongside $ 0.08 monthly dividend payments.
8. Ellington Financial Inc. (NYSE: EFC)
Ellington Financial Inc. (NYSE: EFC) also owned 11 hedge funds as of September 30th. Unsurprisingly, EFC's list of shareholders includes Ellington Management, the hedge fund owned by Ellington Financials founder Mike Vranos.
Ellington Financial cut its monthly dividend payments by 47% in April, but has since increased them again by 25% to $ 0.10, for an annual return of nearly 8%. The next monthly payment is made on January 25th, with the payment having an ex-dividend date on December 30th. The investment firm recently estimated its book value per share at $ 16.98 as of the end of November, which is about $ 2 below the current value of EFC's share price.
7. Pembina Pipeline Corp (NYSE: PBA)
Shares in Pembina Pipeline Corp (NYSE: PBA), owned by 12 hedge funds as of September 30, are down 32% this year. This has put the company's annual return on monthly dividend payments in the 7% range, down from less than 5% at the start of the year. The next monthly payment of $ 0.1638 will be made on January 15th, with the ex-dividend date being December 30th.
Although the energy infrastructure company's earnings declined 62% in the second quarter, management reckoned that cash flow would still be enough to cover its expenses and fund its dividend. With the vast majority of cash flow coming from long-term, fee-paying contracts, PBA's dividend should be safe during the ongoing struggles in the energy industry.
6. Itau Unibanco Holding SA (NYSE: ITUB)
Itau Unibanco Holding SA (NYSE: ITUB), which owned 16 hedge funds at the end of September, closes the first part of our list. The Brazilian banking giant's monthly dividend payments may not be all that lucrative. The next payment is only $ 0.0028, but the company also routinely pays out special or variable dividends. The next monthly payment is made on January 14th and has an ex-dividend date on December 1st.
Click here to read on and see the top 5 dividend stocks paid monthly. Disclosure: None. The top 10 dividend stocks that pay monthly were originally published on Insider Monkey.
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