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The stock market offers many ways for investors to make money. But few investment goals have proven to be more lucrative in the long run than buying dividend-paying stocks.
Although the study is now a bit dated, a 2013 report by JP Morgan Asset Management provides clear evidence that dividend-paying stocks circle around their peers that don’t pay dividends over the long term. Companies that initiated and increased their payments between 1972 and 2012 achieved an average annual return of 9.5%. Meanwhile, companies that didn’t pay dividends generated a dramatically lower annualized return of just 1.6% over the same four-decade period.
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Since most dividend-paying stocks are profitable on a recurring basis and have proven operating models, they are the ideal investment target for people with a long-term view.
Of course, however, not all income seekers are patient. This is where monthly dividend stocks come in. Although only a small number of income stocks pay out a monthly dividend to their shareholders, there are a handful of very high yielding companies that can be bought out. trusted by income seekers.
For example, if you want to generate $ 300 in monthly dividend income, you don’t need to put in an insane amount of money to work. If you invest $ 45,000 and split it evenly among the following trio of very high yielding monthly dividend stocks, which have an average return of 8.01%, you will get about $ 3,600 per year, or $ 300 per month .
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AGNC investment: return of 9.03%
To maximize your monthly dividend income with relatively low risk, the Mortgage Real Estate Investment Trust (REIT) AGNC investment (NASDAQ: AGNC) is the stock you will want to know.
A mortgage REIT seeks to borrow capital at low short-term borrowing rates, which can then be used to acquire higher-yielding long-term assets, such as mortgage-backed securities (MBS). The goal of AGNC and its Mortgage REIT peers is to maximize their net interest margin, which is the difference between the average return on long-term assets and the average borrowing rate.
What is particularly noteworthy about the Mortgage REIT industry is that it appears to be at the sweet spot of its growth cycle. When the yield curve flattens (that is, when the yield differential between short and long-term Treasury yields narrows) and / or the Federal Reserve quickly changes its monetary policy, companies like AGNC often see their net interest margins shrink. Conversely, when the yield curve steepens and the country’s central bank transparently telegraphs its monetary policy moves, it is normal for mortgage REITs to increase their book value and generate higher income. Looking back over decades, it is extremely common for this latter scenario to occur in the early years of an economic recovery.
The emphasis on agency securities also works in AGNC Investment’s favor. The agency’s assets are guaranteed by the federal government in the event of default. Until mid-2021, $ 85.5 billion of AGNC’s $ 87.5 billion in securities were agency assets. While this extra protection reduces the return the business receives on its assets, it also allows the business to use leverage to increase profits.
With AGNC having averaged a double-digit return over 11 of the past 12 years, this is the perfect monthly dividend stock for income seekers eager to buy.
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Pembina pipeline: yield of 7.94%
After the year-long sinking oil stocks experienced in 2020, income investors might not look to the energy sector for dividend ideas. However, ignore the payment of monthly dividends Pembina pipeline (NYSE: PBA) would not be a wise idea.
Pembina Pipeline is an intermediary company that operates primarily in Western Canada. As of September, it had a storage capacity of about 32 million barrels equivalent and was able to transport about 3.1 million barrels of oil per day.
The beauty of the intermediate model is that it is largely unaffected by the daily fluctuations in the underlying price of crude, natural gas and natural gas liquids. Although higher prices encourage drillers to increase production, which in turn opens up more opportunities for transportation, storage and refining services, Pembina’s contracts are set in such a way that its flows of cash flow are highly predictable in virtually all economic environments. Being able to accurately forecast cash flow plays an important role in allocating a company’s capital for infrastructure projects.
Speaking of infrastructure, the company has commissioned more than $ 400 million in new projects this year, including the Prince Rupert Terminal and the Northeastern British Columbia Terminal. It is also identified north of $ 6 billion of profit-generating projects that are in various stages of development. More than $ 4 billion of this opportunity is linked to the Alberta Carbon Grid project, which will focus on liquefied natural gas processing, pipeline connections and other infrastructure solutions.
Pembina Pipeline is an under-the-radar energy company on track to return nearly 8% this year.
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LTC properties: 7.06% yield
The third monthly dividend stock that income seekers can buy with confidence is LTC Properties (NYSE: LTC). LTC pays $ 0.19 per share each month, which works out to a base annual payout of $ 2.28 (just over 7% return).
LTC Properties owns or holds first mortgages on 176 properties in 27 states. The company is focused on long-term care, with an approximate 50-50 split in its asset portfolio between senior housing and skilled nursing properties.
As you can imagine, the pandemic has hit senior housing and skilled nursing homes hard. Between the dangers COVID-19 presents to the elderly and the patchwork regulations some states have put in place for senior housing and skilled nursing facilities, LTC’s management team has had their hands full of challenges. in the past 18 months. To start, the care centers for the elderly filed for bankruptcy during the pandemic. Elderly care represented 11 skilled nursing facilities in LTC’s investment portfolio.
Despite these concerns, LTC Properties has not had to cut its monthly dividend and has seen a steady increase in admissions to senior residences and skilled nursing facilities since the start of the year. Higher vaccination rates among staff and the elderly are moving these industries in the right direction and are expected to significantly reduce the LTC payout ratio over the coming year.
Additionally, LTC Properties appears to be sitting on a real gold mine as the baby boomer population ages. Assuming COVID vaccinations get the United States out of a pandemic by next year, LTC’s leadership team can once again focus on capitalizing on the surefire growth trends in long-term care.
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JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Sean Williams has no position in the stocks mentioned. The Motley Fool recommends Pembina Pipeline Corporation. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
