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Top 10 Dividend Stocks That Pay Monthly

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Tim Frederick
·6 min read
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In this article we present the list of Top 10 Dividend Stocks That Pay Monthly. Click to skip ahead and see the Top 5 Dividend Stocks That Pay Monthly.

Dividend stocks are valuable additions to any portfolio during even the best of market conditions, providing a consistent source of income from your investments that can then be reinvested or used in other ways. However, their utility truly shines during challenging or stagnant stretches of the market, when dividends account for larger chunks of the market’s total returns.

Investors may be surprised to know just how much of the S&P 500’s total returns come courtesy of dividends, though the amount has fallen in the past few decades as growth stocks have taken off. According to Hartford Funds, a whopping 73% of the S&P 500’s total returns in the 1970’s were thanks to dividends, while between 1930 and 2017 the figure stood at 42%.

Of course, when market conditions are poor, that could signify that numerous companies are also in financial peril, which could likewise jeopardize those dividend payments. That’s certainly been the case in the pandemic-savaged 2020, as companies big and small have been forced to slash or outright suspend their dividend payments.

In some cases, those moves have ended lengthy runs of ongoing and non-declining dividend payments, such as in the case of Royal Dutch Shell plc (NYSE:RDS), which is one of the 10 Best Dividend Stocks To Buy According To Billionaire Ken Fisher, but which was forced to slash its dividend this year for the first time since 1945.

The same has been true of monthly paying dividend stocks, which are a much smaller subset of dividend stocks and which tend to be stocks whose prime selling point is their consistent and high yielding dividend payments to investors. Of the less than 60 companies which make monthly dividend payments, several have been forced to suspend their dividends entirely as a result of the pandemic, including EPR Properties (NYSE:EPR), Chatham Lodging Trust (NYSE:CLDT), and Apple Hospitality REIT Inc (NYSE:APLE).

Several others have been forced to slash their dividends this year in response to the challenging market environment, including some of the top monthly dividend stocks on this list, which has been compiled based on the hedge fund ownership of every dividend stock which pays out monthly.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. That doesn’t mean there isn’t money to be made off their consensus stock picks. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Now then, let’s check out the Top 10 Dividend Stocks That Pay Monthly, beginning with Dynex Capital Inc (NYSE:DX). Note that all hedge fund data is based on the exclusive group of 800+ funds tracked by Insider Monkey as part of our market-beating investment strategy.

10. Dynex Capital Inc (NYSE:DX)

Dynex Capital Inc (NYSE:DX) kicks off our list of the Top 10 Dividend Stocks That Pay Monthly, being owned by 8 hedge funds on September 30, 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 currently yields 8.68% annually. That’s well below the stock’s five-year average dividend yield of over 12%, owing partly to the dividend having been cut twice in the past 18 months.

9. Broadmark Realty Capital Inc. (NYSE:BRMK)

Broadmark Realty Capital Inc. (NYSE:BRMK) shares are owned by 11 hedge funds as of September 30, a 35% slide from the beginning of the year. Hedge funds may have been selling in response to the construction lender slashing its dividend payments by 33% beginning in January 2020, which was then followed by another 25% chop beginning in April.

Broadmark currently pays a $0.06 monthly dividend, with the next such payment set to be made on January 15, 2021, for which the ex-dividend date is December 30. The stock’s annual yield stands right around 7%, down from about 15% in March, when BRMK shares were trading for as little as $5.82 alongside $0.08 monthly dividend payments.

8. Ellington Financial Inc. (NYSE:EFC)

Ellington Financial Inc. (NYSE:EFC) was also owned by 11 hedge funds on September 30. Unsurprisingly, the list of EFC shareholders includes Ellington Management, the hedge fund run by Ellington Financial’s founder Mike Vranos.

Ellington Financial slashed its monthly dividend payments by 47% in April, but has since hiked them back up by 25% to $0.10, which yields close to 8% annually. The next monthly payment will be made on January 25, with the payment having an ex-dividend date of December 30. The investment company recently estimated its book value per share at $16.98 as of the end of November, about $2 below EFC shares’ current price.

7. Pembina Pipeline Corp (NYSE:PBA)

Shares of Pembina Pipeline Corp (NYSE:PBA), which are owned by 12 hedge funds as of September 30, are down by 32% this year. That’s pushed the annual yield on the company’s monthly dividend payments into the 7% range, up from less than 5% at the beginning of the year. The next monthly payment, amounting to $0.1638, will be made on January 15, with the ex-dividend date being December 30.

Even as the energy infrastructure company’s earnings slumped by 62% in Q2, management anticipated that its cash flow would nonetheless be sufficient to cover its expenses and fund its dividend. With the vast majority of its cash flow being derived from long-term, fee-based contracts, PBA’s dividend should be safe throughout the energy industry’s ongoing struggles.

6. Itau Unibanco Holding SA (NYSE:ITUB)

Closing out the first part of our list is Itau Unibanco Holding SA (NYSE:ITUB), which is owned by 16 hedge funds as of the end of September. The Brazilian banking giant’s monthly dividend payments may not be overly lucrative, with the next one coming in at just $0.0028, but the company also routinely pays out special or variable dividends as well. Its next monthly payment will be made on January 14 and has an ex-dividend date of December 1.

Click to continue reading and see the Top 5 Dividend Stocks That Pay Monthly. Disclosure: None. Top 10 Dividend Stocks That Pay Monthly is originally published at Insider Monkey.