For an income investor, there are few things better than receiving a dividend every quarter from a reliably profitable company. One of those rarities is owning a company that actually distributes its payout on a monthly basis; the wait for a new distribution is a matter of weeks rather than months.
Continue Reading Below
Stocks with monthly payouts tend to fall into three categories: oil and gas players, real estate investment trusts (REITs), and business development companies. I've selected the pair of stocks for this article from the first two. And they are:
There are exciting corners of the stock exchange. Stag Industrial (NYSE: STAG) does not occupy one -- it's a REIT that specializes in industrial properties occupied by single tenants, specifically warehouses, distribution hubs, and light manufacturing facilities. A thrill-a-day company, this ain't.
What it lacks in excitement, Stag Industrial makes up for in performance. It's taking advantage of increased demand for such spaces, which comes from the rise of online retailers with light or non-existent brick-and-mortar operations.
This, combined with an assertive acquisitions policy, boosted Stag Industrial's revenue by 20% on a year-over-year basis in the REIT's second quarter, to just over $72 million. Although the bottom line landed slightly in the red, funds from operations (a more important profitability metric for REITs) advanced a robust 40% to $38.1 million. Not many of the company's facilities were empty during the period -- total occupancy stood at 94%.
Continue Reading Below
There should be plenty more where that came from. Demand for its facilities will only grow with the continued expansion of e-commerce, and the company's not-overly levered balance sheet and rising FFO will help it maintain its acquisition spree.
Stag Industrial's next dividend amounts to just under $0.12 per share, which makes for a payout ratio of 86% on that Q2 FFO figure. This distribution is to be paid on Sept. 15 to shareholders of record as of July 31. At the most recent closing stock price, its yield stood at 5%. Well above the current 1.9% average of dividend-paying stocks on the S&P 500.
Canadian midstream oil concern Pembina Pipeline (NYSE: PBA) is another company that keeps its dividend flowing every month.
Although the country's oil sands boom has run into hiccups lately, not least because of weakened oil prices, there is still plenty of business for big midstream operators like Pembina. In order to take full advantage of this, the company has made major infrastructure investments -- to the tune of nearly 3 billion Canadian dollars ($2.4 billion), which has driven up indebtedness past CA$4.8 billion ($3.9 billion).
But it's already producing results. In Q2, revenue grew by 14% on a year-over-year basis to land at almost CA$1.2 billion ($969 million). Net income came in under analyst estimates but nevertheless saw a 10% improvement, at CA$124 million ($100 million).
Much of Pembina's recent investments, plus its splashy deal for almost CA$10 billion ($8.1 billion) earlier this year to buy peer Veresen, will start contributing to results in the coming quarters. This bodes well for the company's near-term prospects and opens the possibility for higher dividends.
The upcoming monthly distribution from Pembina is CA$0.17 ($0.14), which makes for a reasonable 35% payout ratio on the company's Q2 per-share net earnings figure. The dividend will be handed out on Sept. 15 to stockholders of record as of Aug. 25, and yields just under 5%.
10 stocks we like better than Pembina Pipeline
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Pembina Pipeline wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of September 5, 2017