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3 Dividend Stocks to Buy to Earn a Monthly Check

August 01, 2018

Many dividend stock investors are quite patient. They seek out companies that have great assets and generate rising revenues with ample margins. And they are very happy to find them at a discount to what they should be valued by the stock market. They buy the stocks of these companies and are content to collect dividend payments each quarter while they wait for the stock market to recognize the true value even if this takes years to achieve.

But there are plenty of investors that aren’t so patient. They want to buy a good company’s stock and they want to get paid and get paid right away. They want their dividends paid monthly; Each and every month, without question.

If you are in the second category of investors, then I have a nice collection of three stocks that pay their shareholders monthly dividend checks and are bargains in the stock market right now.

I start with a stock in a business that’s used to getting paid each and every month — real estate.

Monthly Dividend Stock: Realty Income (O)

Monthly Dividend Stocks: Realty Income (O)

Whether you have a mortgage or a lease on a property, you’re used to writing checks each month to satisfy your debt liability. So, a company in the real estate business should be expected to pay their shareholders on a monthly basis. But many do not. One that is truly focused on investors seeking monthly payments is Realty Income Corporation (NYSE:O).

Realty Income Corporation is a real estate investment trust (REIT). And its focus is in retail and commercial properties. Now, I know what you’re thinking, retail properties are white elephants in the real estate market. Malls are dead. Big box stores are going wanting for customers. And so, the owners of these properties are doomed.

Realty Income Corporation agrees. It focuses on retail that is not subject to the Amazon (NASDAQ:AMZN) threat to malls and big box stores. In fact, one of its top five tenants in its over 4,000 properties cashes in on Amazon and other online retailers. FedEx (NYSE:FDX) leases many of its locations around the nation from Realty Income Corporation. And with many returns being shipped back to Amazon, Realty Income Corporation has FedEx eager to write rent checks to it each and every month.

And the same can be said for customers that have a headache and need an aspirin. They turn to Walgreens Boots Alliance (NYSE:WBA) which is another of the top five tenants of Realty Income Corporation. When you need aspirin, or a prescription or just an odd item, it’s easy just to pop down the corner to the local Walgreens and likely that store is a Realty Income Corporation property.

And if you happen to have a few extra pounds on you, and not the British kind, then perhaps you might want to check out a membership to LA Fitness owned by the privately held MidOcean Partners. The fitness gym facility company is spread around the nation and like FedEx and Walgreens, leases many of its properties from Realty Income Corporation.

Then there are two of the continued success stories in retail that not only continue to survive the Amazon threat, but they thrive despite it. The Family Dollar Company owned by Dollar Tree (NYSE:DLTR) and Dollar General Company (NYSE:DG) rule the deep discount retail space that continues to thrive with customers wanting that absolute bottom dollar price. And both of these companies have many, many of their stores owned by Realty Income Corporation.

Revenues for the company continue to rise with the trailing year up 10.20%. And the REIT generates a nice funds from its operations (FFO) return of 11.3%. And despite its great book of tenants, its properties and related assets are still valued at a bargain in the stock market as the stock trades at only 2.17 times its book value.

And the monthly dividend generates a nice annual dividend yield of 4.8%.

Monthly Dividend Stock: Main Street Capital (MAIN)

Monthly Dividend Stocks: Main Street Capital (MAIN)

Source: Shutterstock

Second is a great main street lender and financier to the middle market companies that are spread around the prosperous southwestern section of America. Main Street Capital Corporation (NYSE:MAIN) is set up under the Investment Company Act of 1940 and further codified under legislation in 1980 that was passed to incentivize lending to small and mid-sized companies during the dearth of commercial lending.

Main Street is a business development company (BDC). It provides loans to mid-sized companies and can also participate in the underlying equity of some of its loan customers.

It has a nice portfolio of assets that continue to bolster revenues which have been rising by 15.4% over the past year alone. It is a very well run and cost-effective lender with an efficiency ratio of 26.57%, which is vastly lower than for many of the major traditional commercial banks in the American market. The efficiency ratio measures the percentage of how much it costs to earn each and every dollar of revenue. So, the lower the rate, the more efficient the lender.

And Main Street generates great returns for its shareholders. Its return on assets is at 7.8%, which is seven times better than a good ROA for a bank. And its return on equity runs at 13.2%, which is quite good for a lender.

And because it operates as a BDC, it bypasses income taxes as it pays out the majority of its profits monthly to shareholders. And with a dividend yield of 5.9% and a price-book of a mere 1.67 times — it makes for a great dividend value right now.

Monthly Dividend Stock: Sabine Royalty Trust (SBR)

Monthly Dividend Stocks: Sabine Royalty Trust (SBR) 

Source: Shutterstock

The third is a company that is in the profitable petroleum market: Sabine Royalty Trust (NYSE:SBR). SBR is set up as a passthrough security. It has royalty interests in petroleum producing properties in various states including of course Texas, Oklahoma, New Mexico and Louisiana.

It doesn’t operate the fields, but merely collects its payments from the proceeds of the sale of natural gas and crude oil lifted from the properties. As such, it is very efficient, as it doesn’t need to invest in capital spending for equipment to drill and pump petroleum, only to collect and cash the checks from its property interests.

As such, its operating margin is a whopping 93.30%. And with petroleum prices solidly on the rise over the past year and well supported, its revenue growth from collecting its royalty checks is up 23.8% over the trailing year.

And after it collects and cashes all of its own monthly royalty checks, it turns around and pays its shareholders their monthly dividend checks. And those dividend checks have climbed over the past year by 19.11% to yield a current 7.55%. Sabine makes for a simple way to get paid monthly with little fuss from the profitable petrol market.

Neil George is the editor for Profitable Investing and by company policy does not have any current holdings in the securities mentioned above.