An income-focused money manager friend of mine bragged to me about what he did for one of his clients.
Namely, he’s used his Contrarian Income Report subscription to smartly help her turn a modest nest egg of about $390,000 into monthly income payouts that should last…well, virtually forever.
Three years ago, he explained how he used my “retire on monthly dividends” strategy to help this nice grandmother. Here was the situation:
“She brought me $387,000 … and wants to take out $3,000 per month for 10 years.”
Well, so far, so good for Grandma.
She’s now 38 months into her $3,000-per-month dividend gravy train. Between here and there, she’s taken out a fat $114,000 in spending money. Not bad at all.
And her nest egg is still going strong. Because she’s still sitting on the vast majority of it, $374,000, after more than three years and $114,000 worth of withdrawals!
Grandma’s Monthly Dividend Gravy Train
And those withdrawals arrive every 30 days, like clockwork, neatly coinciding with her modest living expenses. So, what’s Grandma’s secret?
Monthly dividend payers.
Now, these stocks are rare. Out of nearly 20,000 U.S.-listed stocks and funds you can sort through via S&P Global Market Intelligence, only a few hundred pay their dividends monthly. The rest? Mostly quarterly, with a few semiannual and annual payers.
That number shrinks even more if we, say, want a monthly payer that yields more than the market, or that isn’t some beaten-up microcap.
The benefits of monthly payers are clear. Just look at these two example portfolios—one with a number of dividend stocks with varying payout schedules, and one made up of only monthly names. While the sum total is nearly identical, one is plainly easier to plan around than the other.
So what would grandma buy today? Let’s consider these three every-30-day payers that yield an average of 5.2% per year for her potential review.
Stag Industrial (STAG)
Dividend Yield: 4.7%
Stag Industrial (STAG) is a real estate investment trust (REIT) for the modern era. It landlords industrial properties, specifically warehouses and other logistical properties.
You know, like e-commerce businesses need. And, wouldn’t you know it, Amazon.com (AMZN) is Stag’s top tenant; it also serves a diverse list of companies such as Ford (F), Penguin Random House and XPO Logistics (XPO). And the vast majority of its tenants each make up less than 1% of the portfolio.
The problem is, the secret’s out. Stag Industrial is a nearly $5 billion warehouse real estate operator, which is fairly large. Even without accounting for dividends, its 85% jump in the past five years dwarfs that of the Vanguard Real Estate ETF (VNQ). But shares have plateaued for a while, and they’re decently priced as well, at about 17 times funds from operations (FFO).
Has STAG Run Out of Steam?
It’s a good stock. With a good yield. At a decent price. But with a little patience and some short-term-ism from the bears, we can get much better value, and income, out of the same stock.
Shaw Communications (SJR)
Dividend Yield: 5.3%
Here’s the No. 1 problem when it comes to investing in monthly dividend stocks:
It’s hard to internationally diversify.
If you think American companies’ quarterly payouts don’t get it done, try investing in, say, European ADRs. You’re lucky to get quarterly dividends from them. More likely, you’re looking at semi-annual dividends, usually in two different sums. Some pay just once a year!
Not Shaw Communications. This western Canadian telecom delivers wireless service to 1.9 million subscribers, as well as wireline (cable, satellite, internet and phone) to 4.5 million consumers and another 5.1 million people across its business unit. And it takes the profits from those collective businesses and showers it down on shareholders in the form of a monthly payout.
But SJR has a weakness that investors in U.S. telecoms will be familiar with: It serves a heavily saturated market with enough comparable competition to keep its hands full. That keeps top- and bottom-line growth low—even in a “rebound year,” Shaw is only expected to expand its profits by 6%—and dividend growth has been nonexistent for quite some time.
SJR Just Treads Water
If you’re looking for an almost bond-like holding, you’ll get junk-esque yield and a similar payout frequency to many bond funds…and price action should be regrettably similar.
LTC Properties (LTC)
Dividend Yield: 5.7%
LTC Properties (LTC) is a senior housing and healthcare REIT that invests in such properties through mortgage financing, sale-leaseback and other methods. It currently boasts 180 investments across 29 partners in 27 states.
And boy, did it take a whooping in the COVID downturn. From peak to trough, it lost roughly half its value, and it was still well in the red by the end of 2020.
An Unsurprising Struggle for This LTC Provider
COVID spread earliest and hardest in the types of facilities LTC deals in, and the financial impact was quick and clear. The company had just announced a 5 million share-repurchase plan on March 12, then had to wheel around on March 25 and eliminate the plan to shore up its liquidity. FFO plunged by nearly 60% during the second quarter.
Yes, the stock has recovered since then. But LTC is hardly out of the water. Just a few weeks ago, LTC reduced 2021 rent escalations by 50% because “the majority of its operating partners” are still struggling with COVID-related issues.
Then there’s the longer term to think about. LTC was a no-doubt Boomer play for years, but the coronavirus laid bare the vulnerabilities of senior care properties. Long-term, that could impact how eager families are to make use of those facilities, weakening additional upside for the likes of LTC.
Don’t Miss My “Crisis-Ready” 8% Monthly Payer Portfolio
These stocks are what I would call B-level monthly payers. The dividends are safe, the yields are fine, they’re not ludicrously overpriced.
But why plan for the next few decades with B’s when you still have access to A’s?
The stocks in my “8% Monthly Payer Portfolio” are trading at the right price, right yield, right now … and they don’t require a perfect economic environment to churn out massive income and market-beating gains.
I’ve personally hand-picked and safety checked this unique portfolio, from every angle, for maximum safety. That includes a can’t-miss 7%-yielding preferred-stock fund that is actually increasing its cash distributions—a rarity in this space.
These stocks and funds are so cheap that I expect them to easily hold their own if the market limps its way through the continued COVID crisis—and soar faster than the market once the economy really looks like it’s on its way back!
And we’ll soak up their huge payouts the whole time!
The dividends you’ll find here are truly life-changing: drop $500K into this powerful portfolio now and you’ll kick-start a $40,000 income stream. That’s about $3,300 a month in regular income checks!
Now is the time to get in, while you can still do so at a bargain. Click here to get everything you need—names, tickers, complete dividend histories and more—instantly.
Featured Article: What is total return in investing?7 Undervalued Stocks That Deserve More Attention
With the Dow Jones Industrial Average (DJIA) hitting new highs seemingly every day, it may seem like the wrong time to be looking at undervalued stocks. Or is it?
From cannabis to cryptocurrencies, and let’s not forget electric vehicles the market seems to be blowing bubbles wherever you look. And that’s why now may be exactly the right time to zig while the market is sagging. And that means looking for undervalued stocks.
But finding undervalued stocks is subjective. Some analysts use specific fundamental metrics. Others use technical analysis.
However, the general idea is that you’re looking for stocks that are trading below their fair value.
In some cases, these may be stocks whose financials are stronger than other stocks in their sector, but it’s trading at a lower price. In other cases, a company may have potential that is not reflected in its stock price. Put another way, undervalued stocks are stocks that have room to grow. That’s why they deserve a place in your portfolio.
And that’s why we’ve put together this special presentation on stocks that are undervalued right at this time. An investment in these companies is likely to be rewarded because the stocks are moving under the radar from the broader market.
View the "7 Undervalued Stocks That Deserve More Attention"