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The 10 Highest Yielding Monthly Dividend Payers


Published May 30th, 2018 by Nate Parsh

The vast majority of dividend paying companies make payments to shareholders once per quarter. This can cause cash flow issues for investors who need monthly income.

There are some companies, however, that make monthly payments.  In fact, there are 41 such companies that pay dividends to investors each month.

 

This article examines the 10 highest yielding monthly dividend payers for investors looking for both monthly income and high income from their investments.

You can learn more about monthly paying dividend stocks in the following video.

It is important to note that high yielding monthly dividend payers are, on average, far riskier than the overall market.  There is elevated risk of a dividend cut with high payout ratios – which are very often associated with high yields.

High Yield Monthly Dividend Stock #10: Whitestone (WSR)

Dividend Yield: 9.4%

Whitestone REIT acquires, owns and develops commercial properties in densely populated areas.  Most of its shopping center REIT brethren have large spaces with traditional tenants.

As a REIT, Whitestone is legally required to pay out 90% of their profits as distributions.  This means REITs (on average) have high yields.  You can see all the publicly traded REITs in the spreadsheet below.

 

Whitestone often rents to nontraditional tenants and its properties are on the small side in terms of square feet.

The REIT focuses on the areas around Phoenix, Chicago, Dallas, San Antonio and Houston.  These are five of the top fifteen fasting growing populations in the United States.

wsr region

Source: Whitestone Investor Presentation 2018, page 8

The median household income within three miles of a Whitestone property is $81,910, almost 10% above the REIT’s peer average median income.  Only Federal Realty Trust (FRT) has a higher figure.  Higher median incomes mean that consumers in the area can afford to purchase higher priced items.

Instead of a “one size fits all” mentality for its properties, Whitestone aims to add tenants that can meet the needs of the surrounding neighborhoods.  Consumers have responded well to this philosophy and Whitestone has seen demand for its properties increase.  Since the REIT went public in 2010, Whitestone has seen occupancy rise from 80.3%to 90.2% as of Q4 2017.  Same store sales increased 2.6% in 2017, slightly above the peer average of 2%.  Shares of Whitestone have performed well in recent years.

Insert image titled: WSR vs Peers

wsr vs peers

Source: Whitestone Investor Presentation 2018, page 6

While almost all other shopping center REITs have seen their shares decline in the last twelve months, Whitestone’s stock has nearly double digit returns.  The REIT has also outperformed most peers over the last three and five years.

For REITs like Whitestone, Funds From Operation, or FFO, is a better measurement of profitability and cash flow then the traditional earnings per share metric that is used to value most stocks. Because depreciation costs weigh on earnings and REITs often have high rates of depreciation, EPS is not an accurate measure of how a company is performing.

Whitestone released Q1 results on 5/7/2018 and had FFO of $0.31, a $0.01 beat of expectations, but $0.01 below Q1 2016’s total.  Revenue improved almost 19% to $33.59 million, but still missed estimates by $0.23 million.

Whitestone began paying a quarterly dividend on October 1999.  In April, the REIT began paying a monthly dividend.  Whitestone has cut its dividend several times before, most recently for the July 2010 payment.  Since then, the REIT has paid the same monthly dividend so investors looking for dividend growth will be disappointed.  On the other hand, the company hasn’t cut its dividend in a very long time, making it one of the more consistent high yielding stocks on this list.  The current yield is above 9%, which could make Whitestone a very nice income generating position within an investor’s portfolio.

High Yield Monthly Dividend Stock #9: Stellus Capital Investments (SCM)

Dividend Yield: 10.3%

Stellus Capital Investments is a closed-end management investment company.  The company seeks to maximize total return to shareholders with high dividend income and capital appreciation.  Stellus Capital is considered a regulated investment company for tax purposes.

Stellus Capital has approximately $1.5 billion in assets under management.  The company is divided into two investment arms, private credit and energy private credit.  The private credit division makes direct loans into medium sized companies (i.e. companies with between $5 and $50 million in EBITDA) in a wide variety of sectors such as business, technology, healthcare and retail.  The energy private credit division invests in small and medium sized energy companies.

The following chart shows Stellus Capital’s portfolio and geographic diversification.

stellus portfolio

Source: Stellus Capital Investment Q1 2018 Investor Presentation, page 13

As you can see, no one industry accounts for more than 10% of the investment portfolio.  Stellus Capital spreads its investments among 23 different states.  Only Texas and California occupy more than 10% of the portfolio.  A diversified portfolio and geography help protect the company from an industry or region specific downturn.

When it comes to earnings figures, investment companies are judged on their net investment income, or NII, rather than a traditional metric like earnings per share.  NII is the amount of income left over after operating expenses are subtracted from total investment income.  Stellus Capital reported first quarter for fiscal 2018 on 5/8/2018.  The company reported NII of $0.28 per share, $0.02 below estimates and 15.2% below Q1 2017.  The company saw total investment income of $10.91 million, a 10.6% increase from the previous year and $0.12 million above expectations.

Stellus Capital has paid a dividend since December 2012 and a monthly dividend since January 2014.  While the dividend has remained the same since the company IPOed, 10.3% yield is very attractive.  Factor in a diversified business model and shares of Stellus Capital could be an appealing addition to an investor’s income portfolio.

High Yield Monthly Dividend Stock #8: Prospect Capital (PSEC)

Dividend Yield: 10.5%

Prospect Capital Corporation is an  investment company that hopes to achieve high income and capital gains for its shareholders through the use of debt and other equity investments.  As a business development company, or BDC, Prospect Capital invests in small and medium size companies.  Businesses in the initial stages of development seek capital from BDCs to help grow.  BDCs like Prospect Capital pay no income tax if they meet certain requirements, such as distributing at least 90% of their taxable income to shareholders.

Prospect Capital invests in many different sectors of the economy, including auto parts, commercial services, healthcare and media.

psec portfolio

Source: Prospect Capital Corporation Presentation, page 9

Prospect Capital released earnings for the 3rd quarter of fiscal 2018 on 5/9/2018.  The company had net investment income of $0.19 per share, a $0.01 beat of estimates, but a drop of 3.8% from the previous year.  Total investment income declined almost 5% year over year to $162.84 million.  Still, this came in ahead of estimates by $9.6 million.  The company said higher costs led to the decrease in NII.  This decline wasn’t as drastic as some other BDCs in the market, making it perhaps a better option for investors looking to invest in this industry.

Prospect Capital has reduced its dividend several times in recent years. Most recently on 8/28/2017 when the dividend was cut almost 28%.  Investors considering buying Prospect Capital should be aware of recent distribution cuts as there is no guarantee that the company won’t slash its dividend again.

High Yield Monthly Dividend Stock #7: Global Net Lease (GNL)

Dividend Yield: 10.9%

Global Net Lease is a real estate investment trust that maintains a globally diverse portfolio of commercial real estate properties.  The REIT operates on a “sale-leaseback” model.  This means companies will sell Global Net Lease their physical property to unlock value and then turn around and rent it back from the REIT.

Global Net Lease’s collection of real estate asset are made up mostly by investment grade corporate tenants.  The company has real estate in the U.S., the U.K., Germany, the Netherlands and Finland, among others.

gnl geo diversity

Source: Global Net Lease Investor Relations Website

As you can see from the image provided by the company, Global Net Lease focuses on high quality tenants, which helps protects the company during economic slowdowns.  The company also has a wide variety of industries in its portfolio.  While 36% of the total portfolio is described as “other”, the financial services industry is the next largest individual portion and accounts for 14% of assets.  No other industry occupies more than 7% of the total portfolio.  Global Net Lease also has diversity among the types of properties that it owns. Property types are divided among Office (58%), Industrial (19%), Distribution (14%) and Retail (9%).

Global Net Lease reported 1st quarter results on 5/8/2018.  Funds from operations was $0.49, a $0.04 miss of estimates and a 7.5% decline from the previous year. The REIT saw revenue increase 8.4% to $68.1 million.  Revenue was $1.23 million above expectations and an 8.4% increase year over year.  Global Net Lease’s portfolio had an occupancy rate of 99.5%, with an average of 8.6 years remaining on leases.

Global Net Lease has only been a publicly traded company since June of 2015.  While the REIT has only raised its dividend twice since, it has never cut its dividend, something not every stock on our list can say.  A near total occupancy rate, a portfolio of mostly investment grade companies and a maintained dividend make Global Net Least one of the best high yield monthly dividend paying companies.

High Yield Monthly Dividend Stock #6: Harvest Capital Credit (HCAP)

Dividend Yield: 11.3%

Harvest Capital Credit Corporation is a publicly traded BDC that specializes in investing in small and medium size businesses in the United States.  Harvest Capital aims to invest in companies that have shown to have reliable profitability and have annual revenues between $10-$100 million.  Harvest Capital looks for companies that have margins similar to their industry’s average.

Similar to other BDCs on our list, Harvest Capital has a variety of investment product offerings, such as first and second lien loans.  Besides investing to grow businesses, Harvest Capital also can offer investments for debt refinancing or for add-on acquisitions.

Harvest Capital reported its 1st quarter earnings results on 5/10/2018.

Source: Harvest Capital Credit 1st Quarter Results, page 1

Harvest Capital reported net investment income of $0.19 per share, missing estimates by $0.09 and declining 46% from Q1 2017. Total investment income declined 20% to $3.74 million, $0.68 million below expectations.  Harvest Capital management said the decline in net income was due to lower investment income and higher operating expenses.  Investment income was lower than the previous quarter due to a smaller investment portfolio than the previous year.  A smaller portfolio size has meaningful impact on the BDC, as Harvest Capital’s profitability comes from the income it can generate from its investments.

While dividend growth is always welcome, most investors in high income assets want to be sure that their dividends will at least be maintained while they own the position.  And for much of the past five years, Harvest Capital was able to maintain its dividend.  That was until recently.  On 2/8/2018, Harvest Capital cut its dividend 15.6%.  Harvest Capital should only be of interest to those investors with a high appetite for risk, as the company’s fundamentals declined dramatically during the first quarter, culminating in a significant reduction in the dividend.

High Yield Monthly Dividend Stock #5: AGNC Investment (AGNC)

Dividend Yield: 11.3%

AGNC Investment Corp is a mortgage real estate investment trust.  The REIT invests in agency mortgage-backed securities and produces income mostly through borrowing structured as repurchase agreements.  Repurchase agreements are those where one party purchases an asset at a price and then also agrees to buy back the asset at a predetermined, higher price at a later date.  AGNC is the largest internally managed residential mortgage REIT in the market and one of just three such companies with a market cap above $5 billion.

Below is AGNC’s portfolio at the end of the first quarter.

agnc portfolio

Source: AGNC Investor Presentation

As you can see, most of the company’s $69.3 billion portfolio is comprised of 30 year fixed mortgages.  Since AGNC uses leverage to increase its portfolio holdings and pay its dividend, the REIT is susceptible to higher interest rates.  With higher interest rates, the costs of borrowing money increase.  This can have an impact on earnings results.

AGNC Q1 2018

Source: AGNC 1st Quarter Earnings Release, page 4

AGNC reported first quarter EPS of $0.60 per share, right on the nose for what analysts were expecting, but 6.3% below the previous year.  While the company’s net interest income grew 13.6% year over year to $225 million, this was $9.41 million below estimates.

AGNC began paying a monthly dividend in late 2014 and almost immediately slashed its dividend.  Since then the REIT has reduced its dividend to shareholders two other times, most recently for the August 2016 payment.  Shareholders who held shares from 2014 through 2017 saw their dividend payments decline each year at an average of about 4.7% per year.  Recent dividend decreases and rising interest rates should make investors wary of investing in AGNC.

High Yield Monthly Dividend Stock #4: Horizon Technology Finance (HRZN)

Dividend Yield: 12%

Horizon Technology Finance is a leader in the venture lending platform.  The company is a BDC and has invested more than $1.2 billion in venture loans to more than 200 companies since 2004.  The BDC invests capital in a variety of companies.

hrzn portfolio

Source: Horizon Technology Finance Investor Relations page

Horizon invests in companies that provide technology services such as data analytics and storage.  The BDC also loans capital to life science companies that provide drug delivery systems and specialty pharmaceuticals.  Currently, Horizon has no investments in companies in the health care information and services or clean tech industries.

Horizon reported 1st quarter earnings results on 5/1/2018.  The BDC had net investment income of $0.28 in the quarter, a $0.02 miss of estimates and 3.4% below the previous year.  Total investment income increased 3% year over year to $7.17 million, though this still missed expectations by $0.41 million.  Horizon was able to grow investment income largely due to higher average size loans of the portfolio.  Horizon ended the quarter with investments in 80 different companies.  A growing loan portfolio can lead to increases in NII.

Horizon began paying a monthly dividend in January of 2013.  Shareholders received the same dividend each month for almost four years.  In January of 2017, the company reduced its dividend 13%.  Even after the cut in dividend payment, shares of Horizon still offer a very generous yield.  Investors looking for relatively stable dividend payments from a BDC should consider Horizon.

High Yield Monthly Dividend Stock #3: Capitala Finance (CPTA)

Dividend Yield: 12.3%

Capitala Group manages public and private capital that invests in a wide variety of businesses.  The group is composed of four different funds.

cpta investment

Source: Capitala Group Investor Relations Page

The private capital funds have different objectives and different criteria for investment.  Capitala Finance Group, the publicly traded company and the one we will focus on, is a BDC that has invested more than $1.4 billion in 145 businesses in North America.  This public capital fund invests in businesses with at least $4.5 million in EBITDA.  Some of these businesses are well known, such as California Pizza Kitchen, but most saw investments of between $5-$50 million.

capitala diversification

Source: Capitala Group 1st Quarter Investor Presentation, page 6

Capitala has investments in a wide range of industries.  The largest industry by investment dollars for Capitala’s is Business Services (19% of the portfolio), followed by Retail (13%) and Information Technology (12%).  Capitala’s investments are almost all made to companies inside of the United States, with almost half of the portfolio based in the southern states.  Industry and geographic diversification offer some protection against soft economic conditions.

Capitala released 1st quarter 2018 earnings on 5/7/2018.  The company reported NII of $0.28, a $0.02 beat of estimates, but 28% below Q1 2017.  Total investment income declined 15% year over year to $12.57 million.  This did manage to top expectations by $0.43 million.  Much of this investment income decline was due to a decline in the company’s investment portfolio, though Capitala managed to lower its expenses in the quarter.

Investors should be aware that Capitala cut its dividend almost 36% on 10/2/2017.  In fact, the company has cut its dividend several times over the past few years, making it likely that only the most risk tolerant investors should consider Capitala.

High Yield Monthly Dividend Stock #2: Orchid Island Capital (ORC)

Dividend Yield: 14.6%

Orchid Island is a specialty finance company that invests in residential mortgage-backed securities, or MBS.  The principal and interest of these securities are guaranteed by the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation and the Government National Mortgage Association, known as Fannie Mae, Freddie Mac and Ginnie Mae, respectively.

Orchid Island reported 1st quarter 2018 earnings on 4/26/2018.

Source: Orchid Island Capital 1st Quarter Earnings Presentation, page 4

The company saw a net loss of $0.31 per share.  This included a $0.72 loss per share due to large portfolio losses.  Adjusting for this loss, the REIT saw net interest income of $0.41 per share.  Net interest income declined 3.2% from the previous year to $24.78 million.  Weighing on the company was higher than usual management fees.

Orchid Island slashed its dividend 21.4% on 1/11/2018.  Prior to this, the company had reduced its dividend to $0.14 from $0.18 in June of 2015.  The current yield is quite high, but investors should be aware that a dividend cut could occur again.  Due to this and the company’s poor Q1 performance, we suggest investors look elsewhere for a high paying monthly dividend company.

High Yield Monthly Dividend Stock #1: Corus Entertainment (CJREF)

Dividend Yield: 21.1%

Corus Entertainment is a media and content company that supplies television and radio content throughout Canada.  The company was founded in 1999 from assets first owned by Shaw Communications (SJR). During its time as a publicly traded company, Corus has used acquisitions to grow its asset base.  For example, on 4/1/2016, Corus acquired Shaw Media’s television brands.

Corus now owns 44 specialty TV channels and 15 conventional stations in Canada.

corus brands

Source: Corus Entertainment May 2018 Investor Presentation, page 4

Some of the company’s channels include OWN: Oprah Winfrey Network Canada, HGTV Canada, Food Network Canada and the Disney Channel Canada.

Corus owns 39 radio stations, including talk radio, country and classic rock channels, many of which are among the most popular in Canada.  The company’s channels are located in eight of the top ten media markets in Canada.

Corus also develops content that is distributed to more than 160 countries around the world.  The company’s Nelvana division produces animated content for children along with related consumer items.  Corus counts Franklin, Little Charmers and Beyblades among its brands.

Corus reported 2nd quarter of fiscal 2018 earnings on April 5th, 2018.  The company’s fiscal year ends in September.  All figures are in Canadian dollars unless otherwise noted.  The company reported earnings per share of $0.20, an increase of 54% from Q2 2017.  The company grew revenue 0.03% year over year to $369.5 million.  Profit was up 10% as the company was able to lower its costs.  Net income to shareholders was $40 million, a 61% increase from the previous year.  TV revenue was flat.  Advertisers today have a wide variety of platforms, such as social media, to spend their dollars on.  On the plus side, radio revenues were up almost 3%.  Television makes up 91% of revenues and 92% of profit in Q2.  The television division saw profit improve 2.2% while radio grew 8.5%.

Corus is attempting to diversify its revenue streams. One way the company is attempting to create additional revenue streams is through the use of subscription services.  The company’s Treehouse app, which was on Apple’s (AAPL) App Store Best of 2017, is marketed to women and preschool-aged children.  The app costs $4.99 per month and provides subscribers access to more than 1,500 Treehouse shows, such as Dora the Explorer and The Wiggles.

Corus is the highest yielding monthly stock on our list, offering investors a very rich dividend.  The company had maintained or raised its dividend every month since February of 2008 until it recently reduced its dividend payment 5.3% for the upcoming 5/31/2018 payment.  Managing to survive the last recession with its dividend payment intact is a good sign for the company if/when the next recession occurs.

Still, the recent dividend cut is a concern.  While Corus offers an exceptionally high yield, US residents should note that Canada imposes a 15% dividend withholding tax on US investors.

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