STAG - 3 Dividend Stocks That Pay Every Month

2023-10-13 09:05:00 ET

Summary

• All three of these companies have investors earning income every month.
• Not only do these REITs pay monthly dividends, but they also appear to be trading at a great valuation.
• The REIT sector has been under pressure in 2023, but the tide is beginning to shift with the end in rate hikes near.

Getting paid a dividend is great, but getting paid a dividend every month from the same company is fantastic.

I have an investing goal to reach $100,000 in annual dividend income by the time I retire. I fully understand this is a process that takes time, but time is something I have on my side.

However, when it comes to choosing dividend stocks, I am focused more on quality, rather than companies that pay me a dividend on a monthly basis as a priority. However, all three of these companies that we look at today pay a monthly dividend, and they are high-quality stocks.

3 Monthly Paying Dividend Stocks

Monthly Dividend Stock #1 - Realty Income ( O )

You cannot talk about monthly dividends and not include the "Monthly Dividend Company" which is Realty Income. Realty Income is far and away the most popular REIT on the market today in my view, known for consistent results, but known even more across the retail community for paying a monthly dividend.

Realty Income has paid a growing dividend for nearly 30 years, making them a dividend aristocrat.

Realty Income not only increases their dividend each year, in fact, they increase their dividend each quarter. As you can see on the image above, the company has increased their dividend for 103 consecutive quarters, which is quite impressive.

Realty Income is backed by a strong portfolio that has been in demand for decades, but their top tenants have come into question of late. Here is a look at the top 20 tenants.

As you can see, the majority of their top tenants are of investment grade, but Dollar General ( DG ), Walgreens (WBA), and CVS Health ( CVS ) have had difficult years in 2023, facing stiffer competition, largely from the likes of Amazon ( AMZN )

These are fair concerns, but I believe they are a bit nearsighted for the time being. Knowing this, though, Realty Income and the management team can redesign the portfolio of tenants moving forward as they like as leases expire.

In terms of the dividend, Realty Income currently yields a dividend of 6.0% which is unheard of for this company. Although you get paid a monthly dividend, the dividend growth is only 3%.

Given that the yield is high, you could probably guess that the valuation is quite intriguing, as yields have an inverse relationship with stock prices. If you are a patient investor with some time, not only will you get a monthly juicy dividend, but you will be rewarded for holding the stock as well. Analysts are estimating AFFO of $4.15 next year, which equates to an AFFO multiple of just 12.2x for a stock that historically trades closer to 19.3x.

Monthly Dividend Stock #2 - Agree Realty ( ADC )

Agree Realty can be thought of as the younger sibling to Realty Income. Not only does ADC pay a monthly dividend, but they are also a net lease retail REIT, and when we look at the top tenants, you will see a lot of crossover.

Agree Realty is much smaller than Realty Income in both size and value as the REIT currently has a market cap of $5 billion, which can add to the risk levels, but also the upside potential.

Agree Realty shareholders have enjoyed a compound average annual return of 11.3% since the REIT went IPO in 1994, the same year Realty Income went IPO.

Agree Realty has just over 2,000 properties, with nearly 70% being leased out to investment grade tenants. Here is a closer look at those top tenants.

7 of the top 20 tenants, including 4 of the top 5 tenants for ADC, are also found on the top tenants list for Realty Income. The primary difference comes down to exposure, as Realty Income has many more properties, they can spread out their tenant exposure a lot better than Agree Realty can right now.

In terms of the dividend, ADC currently yields a dividend of 5.3% and as you can see from this chart, they have made a concerted effort to grow the dividend at a solid clip. Like Realty Income, the dividend is paid on a monthly basis. Over the past five years, the dividend has grown at an average clip of 6.8%.

Turning to valuation, you will find that Agree Realty actually trades at a higher multiple than Realty Income today. The reason being is that the growth has been strong from an AFFO standpoint, where ADC has generated high single digit growth rate throughout the past five years.

Analysts are calling for 2024 AFFO of $4.09 per share, which equates to a forward AFFO multiple of 13.4x. Over the past five years, shares have traded at an average multiple of 20x.

Monthly Dividend Stock #3 - STAG Industrial ( STAG )

STAG Industrial operates out of the industrial sector, which can be a way to play the growth of e-commerce.

The company recently reported a Fall investor update, in which one of the largest things to come out of that was the leases that were due to expire or be up for renewal. Management stated that 93% of those leases have been addressed, which has lead to cash rent changes of 30.8%, meaning management was able to negotiate higher fees for those leases.

In addition, management also reaffirmed their same-store cash NOI goal of 5% to 5.25%.

STAG Industrial is the second-largest industrial REIT behind Prologis (PLD), having a market cap of $6 billion.

When it comes to STAG, e-commerce growth is a tailwind for the business. As you can see, in the US, e-commerce sales still only account for less than 15% of total retail sales. E-commerce penetration is expected to nearly double to 27% by the year 2026, which would be a huge growth driver for STAG.

Similar to the other REITs we have looked at today, STAG also pays a safe and reliable monthly dividend. That dividend currently yields 4.3% and has been growing for 10 consecutive years.

Given that REITs as a whole have been under pressure in 2023, although STAG is actually up on the year, the REIT still trades at a discount to its historical average. Analysts are looking for the REIT to generate AFFO of $2.06 per share next year, which equates to an AFFO multiple of 16.7x, which is below their five-year average of 18x.

Investor Takeaway

All three of these companies happen to be REITs, and all three pay monthly dividends. Not only do they pay monthly dividends, but they appear to be trading at a discount to their historical averages.

However, since they are REITs, they have been under pressure from higher interest rates, which are expected to be higher for longer. On the positive side, it seems as if we are near the completion of rate hikes in my view, which should be a relief to the REIT sector.

In the comment section below, let me know which of these monthly dividend paying stocks you like best.

Disclosure: This article is intended to provide information to interested parties. I have no knowledge of your individual goals as an investor, and I ask that you complete your own due diligence before purchasing any stocks mentioned or recommended.

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