The stock market seems more uncertain than ever in the fourth quarter of 2023. Inflation remains stubbornly high, and the Fed shows no signs of loosening monetary policy anytime soon; meanwhile, geopolitical tensions are headlined by conflicts in the Middle East and Ukraine. Against this backdrop, many investors are in search of safe havens and stability. In last week's trading, the yield on the 10-year Treasury note rose above 5% for the first time since 2007, while December gold futures (GCZ23) jumped briefly above the psychologically significant $2,000 level.
So, while growth stocks may have led the charge during the market's massive first-half rally, many investors are now discovering the somewhat more understated appeal of dividend stocks - some of which can offer not only a steady income stream, but also the potential for share price growth. For those who rely on income from their investments, monthly dividend stocks are a particularly appealing choice, as they provide cash flow more frequently.
Let's take a closer look at three monthly dividend payers that Wall Street analysts have given their seal of approval: Apple Hospitality REIT (APLE), STAG Industrial (STAG), and AGNC Investment Corp. (AGNC). Each of these income picks is dishing out dividends at an annual yield of 4% or better, and they pay shareholders back every month. Sure, there are risks involved, like with any investment - but these stocks bring some attractive income potential to the table.
Apple Hospitality REIT
Apple Hospitality REIT, Inc. (APLE) is a real estate investment trust (REIT) focused on mid- and upper-tier hotel properties across the U.S. Their portfolio is heavily skewed toward the Marriott (MAR) and Hilton (HLT) brands, which are known for their loyal customers and high demand. APLE has 223 hotels with more than 29,400 guest rooms spread across 87 markets in 37 states.
The stock is up just 3% on a year-to-date basis, though it's 67% higher over the past three years - comfortably outperforming the S&P 500 Index ($SPX) over this time frame.
In terms of earnings, APLE's funds from operations (FFO) fell short of expectations in the most recent quarter - marking a relatively rare bottom-line miss for the REIT. Looking ahead, analysts are targeting 4% earnings growth for APLE in this year and the next.
Now, let's talk dividends. APLE used to shell out a steady dime per share every month after its 2015 debut on the stock market. But then, the hospitality world took a hit from COVID-19, and they had to pause the dividend party in April 2020. The good news is, APLE restarted shareholder payments again in October 2020, though at a reduced rate of just one cent per share.
That said, they've quickly climbing back up the dividend ladder - and currently, they're serving up 8 cents per share every month to investors. That adds up to a 6.57% annual yield, with room for growth.
As for what the analysts say, APLE gets a thumbs-up from a group of 19, with a consensus " moderate buy" rating. The average target price for the stock is $20.65, which indicates expected upside of 18% from current levels.
STAG Industrial
STAG Industrial, Inc. (STAG) is also a REIT, though they're far removed from Apple's high-end hotel domain. Boston-based Stag owns and operates industrial properties across the U.S. - think warehouses, distribution centers, factories, and e-commerce fulfillment centers. The company's largest tenant is none other than Amazon (AMZN), though they account for a reasonable 3% of revenue.
As for STAG's stock, it's been fairly resilient in a turbulent market. It's up only about 4% year-to-date, though it's bested the S&P 500 by gaining 21% over the last 52 weeks.
In terms of earnings, STAG met the experts' expectations in Q2 2023, with FFO of $0.56 unchanged from last year and revenue up 16% year-over-year to $171.7 million. STAG's next quarterly report is due out on Oct. 26.
STAG has been increasing its common stock dividend every year since 2011. Right now, they're dishing out a monthly dividend of $0.123 per share, which annualizes to $1.47 per share. That's a sweet 4.46% dividend yield - and they're only using up 65% of their earnings for these dividends, leaving plenty of room for more growth.
As for what the experts think, STAG gets a consensus "moderate buy" rating from seven analysts. The average target price for the stock is $38.38, which could mean a 17.8% gain from its current price.
AGNC Investment
AGNC Investment Corp. (AGNC) is also a REIT, but they invest primarily in residential mortgage-backed securities (MBS). At the end of Q2, AGNC's portfolio consisted of $58.0 billion in securities, led by $46.7 billion in residential MBS - and features a relatively full-throated hedging strategy featuring U.S. Treasuries.
Shares of AGNC have sold off hard recently, but the stock is still up 21% in the last 52 weeks to outpace the broader equities market.
When it comes to earnings, AGNC swung to an adjusted profit of $0.67 per share in the second quarter, reversing a loss in the year-ago period. The results topped Wall Street's expectations for a profit of $0.58. AGNC will report its latest quarterly results on Oct. 30.
Now, let's talk dividends. AGNC is offering shareholders a monthly dividend of $0.12 per share, which means $1.44 per share for a whole year. That translates to a pretty hefty dividend yield of about 17.43% at its current stock price.
On Wall Street, AGNC gets a collective " moderate buy" rating from 9 analysts. The average target price is $10.62, suggesting a possible 29.5% upside from its current price.
Conclusion
In a nutshell, monthly dividend-paying stocks can be appealing in uncertain economic times, thanks to the steady income flow. These top-rated picks are worth considering at current levels - and to help avoid falling into a yield trap, investors should be sure to weigh a company's earnings history, forward-looking forecasts, and track record of paying back shareholders before investing.
On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
