Stocks that deliver monthly income aren’t that common. Many energy master limited partnerships (MLPs) were monthly dividend payers, but those days are over. And even the best of them aren’t a very good pick right now. That makes finding the best monthly dividend stocks a challenge.
But some stocks still do deliver monthly income that are worth your time. They’re usually organized under a business sector like real estate investment trusts (REITs) or business development corporations (BDCs) that are structured for tax purposes so that investors are direct owners in the company and share their net profits as dividends.
Even if you’re a growth investor it’s good to have some solid monthly dividend paying stocks in your portfolio just to offset down markets like the one we’re in right now.
And monthly dividends work well with the more typical quarterly dividends, since the cash is rolling in more regularly. Although, each payment is 1/12th the annual dividend rather than 1/4th the dividend. With all of that said, here are six of the best stocks that fit the bill:
- Horizon Technology Finance Corp (NADSAQ:HRZN)
- Armour Residential REIT (NYSE:ARR)
- Gladstone Investment Corp (NASDAQ:GAIN)
- LTC Properties (NYSE:LTC)
- PennantPark Floating Rate Capital (NASDAQ:PFLT)
- Solar Senior Capital (NASDAQ:SUNS)
Best Monthly Dividend Stocks: Horizon Technology Finance Corp (HRZN)
Alternative financial companies have been on the rise since the market crash in 2008 hamstrung banks and decimated the Wild West venture capital markets.
What has grown back is a more measured approach to venture capital that usually goes by the term “alt-financials.” These are non-bank lenders that make capital available for companies that find it hard to get financing through traditional lenders at favorable terms.
HRZN focuses on development stage life sciences and technology companies. It will provide up to $25 million in financing for up to 2 years and can also take warrants or success fees as part of its payment.
It currently has about a 10% annual dividend it pays monthly. The stock has had its up and downs. On the one hand, it’s in the hottest sectors in the market. On the other, these are small players and risk default in a tough economy.
But HRZN has its assets diversified and has a good record of picking the right companies.
Armour Residential REIT (ARR)
When you think of REITs, you think about companies that own land or properties they lease out to tenants. But there’s another type of REIT that has sprung up that only deals with mortgages and mortgage-backed securities.
ARR’s portfolio focuses on mortgages that are underwritten by U.S. government agencies, which also removes a lot risk in its investment portfolio. If a homeowner defaults, the government agency that backs the mortgage has to pay most of that loss, not ARR.
This business generates a lot of cash and that means it generates a big dividend yield. That yield now stands around 12.7%.
Given the fact that the real estate market should be hot for a number of years, with interest rates pinned a record lows, ARR is in a good space.
Gladstone Investment Corp (GAIN)
This firm has a number of funds inside it that all pay monthly dividends. This is the private-equity fund that focuses on lower middle market companies. GAIN helps with capital, accessing markets and growing the businesses.
It generally invests up to $30 million in debt and equity in a company that has between $3 million to $20 million EBITDA. It focuses on stable companies and prides itself on developing long-term relationships with its companies.
This stability is a nice hedge in a market as volatile as this one. Once the next economic stimulus is sorted out after the election, GAIN will be a beneficiary. Until then, the stock has a 10% dividend to keep the cash coming.
LTC Properties (LTC)
There are two long-term trends that were here before the novel coronavirus pandemic and will be here after a vaccine is found and distributed: a graying population and healthcare.
LTC is a REIT that for nearly 3 decades has focused its business on these two property sectors. There’s little doubt that once we get out of the current mess we’re in, these two sectors will once again be on the growth track.
Currently, this sector has gone begging as housing REITs and tech stocks have seized the day, but LTC has a foothold in a strong long-term trend that will endure. And its 7% dividend makes it a far more attractive option than parking your cash in the bank.
PennantPark Floating Rate Capital (PFLT)
Another alt-financial, PFLT provides first lien debt to middle market companies, primarily in the U.S. market. It also supplies some second lien debt and takes equity positions in some companies.
Its average investment size is $10.6 million and has a total portfolio of $1.1 billion. PFLT currently has 104 companies in its portfolio that are in 43 industries.
Recently, PFLT formed a joint venture with global private markets investor Pantheon to expand its growth opportunities.
PFLT stock currently has a big 14.5% dividend and given its well-seasoned management and the quality companies in its portfolio, it should weather the current pandemic well. All of that stacks up to make it one of the best monthly dividend stocks to consider buying now.
Solar Senior Capital (SUNS)
You may think that this BDC focuses on the solar industry, but it doesn’t. It works with companies that are looking for $5 million to $20 million in capital as either first lien or second lien debt.
Its clients are generally U.S.-based companies that are non-cyclical businesses. This keeps reporting and transparency easy. And the non-cyclical model means SUNS doesn’t have to hedge across industries to keep a portfolio balanced when sectors rise and fall.
Again, like many of these companies that are financing small- and medium-sized businesses, the current risk is sustaining the economy until it can recover. If the economy seizes, SUNS’s clients will have a tough time repaying their loans. And that will make it tough for SUNS.
But SUNS stock already has priced in that risk, so its 9.5% dividend is very attractive and a good source of income.
On the date of publication, Louis Navellier has no long positions in any of the stocks in this article. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.