In the working world, paychecks show up every two weeks. Or at least, every month. Which keeps up with the pace of monthly bills, charges, and expenses.
In the stock market world, payouts (dividends!) arrive every quarter. That’s 30 days in between bills, but a full 90 days spanning divvies.
Hence the appeal of monthly dividends. These management teams know that the investors who hold their stock are here for the payment. It’d better show up every 30 days, and it’d better be the same amount. No cuts allowed.
Problem is, some of these monthly payers are writing checks their business can’t cash. So let’s “audit” the last decade of receipts from the six biggest monthly payers in America. We’re asking two questions:
- Did the monthly check arrive on time and in full?
- And were investors able to cash their checks without taking down the price of the stock?
Here’s the list, along with a spoiler: half of these monthly dividend companies couldn’t keep the checks coming for a full decade.
The 6 Biggest Monthly Dividend Payers
Why the focus on 10-year total return when we are here for the dividends? Because we’re not interested in a melting share price! When we retire on dividends we want our principal to stay intact (or, even better, to appreciate).
As you can see this is not a “close your eyes and buy” shopping list. We have some problem children. To name names, landlord EPR Properties (EPR) was a compelling buy for retirees. It collects rent checks from “experience venues” focused on activities like Topgolf and ski resorts. Younger generations spend their money on experiences versus collecting “things” so, perfect, right?
Kind of—until 2020 came along! The world shut down in March and by May, EPR had suspended its monthly payout. The “temporary freeze” ended up lasting fourteen months because it took a while for the world to reopen.
Then we have the “other Apple,” Apple Hospitality (APLE), a hotel landlord whose roughly 220 old properties fly the Marriott and Hilton flags. Business travel is a big driver of APLE’s business and that came to a halt in March 2020. And likewise, its monthly payout skidded to a stop!
When APLE resumed payments in March 2021, they were not every month. They were quarterly, and even then, only a penny per share. The monthly check didn’t return until March 2022—two full years after it vanished.
Agree Realty (ADC) delivered the second-best total return in our audit, 135% over the 10-year period. More than a double, through rents from the Walmarts and Tractor Supplys of the world.
Agree is new to the monthly game, though. It paid a quarterly dividend until January 2021, when its marketing team flipped to a monthly payout, which Agree has paid on time ever since. Five of the ten years it’s been paying the monthly—but hey, let’s note it’s a recent convert to Monthly Land.
Realty Income (O) deserves its own line. It literally trademarked “The Monthly Dividend Company,” and to its credit, it has dished checks every 30 days for decades. Problem is, a 48% total return over an entire decade is sort of terrible!
AGNC Investment Corp (AGNC) is quietly another dog, even though it always pays a generous headline yield. And monthly, too! So what’s not to like?
The not-so-great total returns, that’s what.
The company is a mortgage REIT, which means it buys mortgages. These are relatively safe mortgage-backed securities from government agencies like Fannie and Freddie, so there’s not a big problem there. The issue is that these mortgage bonds don’t pay a lot of money, so AGNC “levers up”—it borrows to buy more to increase its income. Then money is too expensive and this eats into AGNC’s profitability.
In March 2020 AGNC chopped the monthly payout from $0.16 to $0.12—and never restored it. This stock is more of a breakfast beer than a long-term holding. There’s a time and a place, but you don’t want to make a daily habit out of it. Investors who held over the past decade earned just 88%, which isn’t very good—it means AGNC compounded at only 6.5% per year. This stock dishes a monthly dividend of 12.9% and loses nearly 6% per year in price. Not ideal!
The monthly champion is a favorite of ours here at Contrarian Outlook, business development company (BDC) Main Street Capital (MAIN). Main was early on the monthly train, paying its divvie every single month (without a cut!) since its 2007 IPO.
And MAIN grew investors’ wealth, too. The shares themselves are up 59% over our decade, before a single dividend. Add the payout and you’re at 236%, the top of our audit table.
What makes MAIN the bluest of BDC blue chips? Two engines instead of one. Most of its competitors simply lend money and collect interest. MAIN lends and takes equity stakes alongside the debt.
Make no mistake: Management is bullish. It just declared its 19th consecutive quarterly “bonus” dividend—that’s on top of the regular monthly payout, which it raised 4% this year. That adds up to an 8.4% yield, including special payouts. And it teased another likely bonus for September! And for those of us paying strict attention to net asset value (NAV), there has been no blip whatsoever. MAIN’s NAV grew to a record high.
Here’s another great thing at MAIN. Insiders own 3.8% of the company, roughly 3.7 million shares. That’s unusual and high for a BDC. They run the place like they own it, because… they do!
So… should we run out and buy MAIN? Well, we need to be careful. There are private credit fears in the market that we must consider before piling into MAIN, or any monthly dividend. Let’s not buy blindly and end up with an undercover dog like AGNC! A better bet: these elite 11%+ dividends, paid monthly.