Dividend stocks have their place regardless of economic conditions, but interest in them always increases with economic uncertainty. The problem with many dividend stocks, though, is they pay dividends in the range of 1% to 3%. That can’t compete with the S&P 500’s average historical returns, which are nearly 10% per year over the past 50 years. Many investors are interested in the next best high-yield monthly dividend stocks to add to their portfolio.
In most cases, double-digit dividend yields are unsustainable, but some high-yield dividend stocks come close. Combine high yields with monthly dividends and you’ll have a strategy that will perform well even when the economy is wavering.
In reality, the best strategy depends on your goals as well as where you are on your investment journey. For the working investor, it’s good to have a mix of both dividends and growth stocks. That allows you to earn some consistent dividend income while also taking advantage of high growth rates while the economy is performing well.
Best High-Yield Monthly Dividend Stocks
Here are our top picks for high-yield monthly dividend stocks to buy:
- AGNC Investment Corp. (Nasdaq: AGNC)
- Ellington Financial Inc. (NYSE: EFC)
- Gladstone Capital Corporation (Nasdaq: GLAD)
- Main Street Capital Corporation (NYSE: MAIN)
- PennantPark Floating Rate Capital Ltd. (Nasdaq: PFLT)
No. 5 AGNC Investment Corp.
Dividend yield: 11.06%
AGNC Investment Corp. is a real estate investment trust (REIT) that invests in residential mortgage-backed securities on a leveraged basis. It has an $82 billion portfolio as of December 2021. The vast majority ($72.8 billion) of its portfolio consists of 30-year fixed mortgages. However, it also has other types of mortgages, such as 15-year fixed and collateralized mortgage obligations (CMOs).
For investors, the appealing thing about AGNC is undoubtedly its dividends. It pays monthly dividends that it sometimes adjusts, but it tends to pay the same dividend every month for years at a time. For instance, it currently pays $0.12 per share and has been doing so going back to April of 2020. That works out to nearly $1.50 per share annually in dividends, and the stock currently sells for around $13 per share.
No. 4 Ellington Financial Inc.
Dividend yield: 10.26%
Ellington Financial invests in residential and commercial mortgage-backed securities as well as consumer loans and asset-backed securities. It uses a proprietary portfolio management system called ELLiN that helps it properly assess and manage risk. In addition, it uses hedging tools to hedge its credit, interest rate, and foreign currency risk.
In terms of dividends, EFC has a more than generous yield. It adjusts its dividends on an as-needed basis, but it has paid $0.15 per share since the spring of 2021. However, it cut its dividend by more than half in February 2019; before then, it was paying $0.41 per share. Either way, its yield in excess of 10% is a nice bonus for investors.
No. 3 Gladstone Capital Corporation
Dividend yield: 7.18%
Gladstone Capital is a firm that works with management, entrepreneurs, and private equity sponsors to secure financing for lower middle-market companies. In other words, it helps businesses get funded, so this is a way to indirectly invest in private equity. Currently, it owns $3.4 billion worth of assets and invests in “established, growth-oriented or recession-resistant businesses, as the company’s website puts it.
Although GLAD’s yield is slightly lower than the REIT mentioned previously, it may be a good way to diversify so as to not earn all of your dividends from residential real estate. Currently, GLAD shares are paying $0.065 per share every month and have done so consistently since April 2020. Before that, it paid a slightly higher $0.07 per share, which it had done every single month going all the way back to April of 2009.
No. 2 Main Street Capital
Dividend yield: 5.99%
Main Street Capital is another capital investment firm that provides private equity and debt capital. Specifically, it invests in middle-market companies with annual revenues of $10 million to $150 million. That may sound large, but it is relatively small by Wall Street standards. Hence, Main Street’s goal is to help smaller companies obtain the funding they need. Its portfolio is also diversified, investing in a wide variety of types of businesses.
Once again, its dividends are not quite as high as the REITs mentioned earlier, but it can provide further diversification and a consistent yield. Also unlike other high yield dividend stocks on this list, MAIN has consistently increased its dividend. Currently, it pays $0.215 per share and has been increasing its dividends since 2013.
High Yield Monthly Dividend Stocks No. 1 PennantPark Floating Rate Capital Ltd.
Dividend yield: 8.8%
PennantPark is another capital investment firm, but its monthly dividend puts it closer to some of the REITs mentioned earlier. The company primarily provides first-lien debt. First-lien debt is debt that is paid back before all other types of debt. Hence, PennantPark investors will be prioritized over other debt holders. Its portfolio contains $1.18 billion of assets and 115 companies in 46 different industries.
As mentioned, PFLT pays a generous dividend. But it also has a reasonable P/E ratio of 11.27 and earnings per share (EPS) of 1.15. Its total investment income in 2021 was $26 million. PFLT is also very consistent with its dividend payments. Currently, it pays $0.095 per share and has done so going all the way back to March 2015.
In addition, it has consistently raised its monthly dividends going back to 2011 and has never decreased its payouts during that time. It usually increases its dividend by one half or one quarter of one cent.