We recently compiled a list of the 11 Best Stocks That Pay Monthly Dividends in 2024.In this article, we are going to take a look at where Realty Income Corporation (NYSE:O) stands against the other stocks that pay monthly dividends.
Dividend stocks have long been a favorite among investors, regardless of the payout frequency. Companies, however, are deliberate in determining how often to reward their shareholders. Annual and semi-annual dividends might provide larger payouts, but their unpredictability can be challenging for investors. While major firms opt for quarterly payouts due to practicality, some choose monthly distributions, which many investors find attractive for the steady stream of passive income. In addition, a reduction in monthly payouts would have a smaller immediate impact, and receiving dividends monthly is one of the closest alternatives to a regular paycheck, simplifying the management of day-to-day finances. That said, history suggests that companies offering monthly dividends often boast higher yields but may lack consistent dividend policies.
Regardless of market conditions, dividend stocks can be a useful tool for enhancing income and boosting portfolio growth potential. For instance, investors who are years away from retirement often reinvest their dividends to increase returns. According to an estimate by Charles Schwab, a hypothetical $10,000 investment in a broader market at the end of 1993 would have grown to over $182,000 by the end of 2023 if dividends were reinvested, compared to only $102,000 if they had not been reinvested.
This means that investors looking to reduce their risk while still maintaining growth potential may want to consider high-quality dividend-paying companies. This approach is favored by Ramona Persaud, manager of Fidelity Equity-Income Fund and Fidelity Global Equity Income Fund. She tends to focus on shares of high-quality firms that offer attractive valuations and strong dividends. Persaud pointed out that falling interest rates can create a favorable environment for dividend stocks, as their yields become more appealing compared to declining bond yields. She also mentioned that lower interest rates may lead to gains across a wider range of stocks, a shift from the past two years when market gains were largely driven by a few large-cap growth stocks. Here are some other comments from the analyst:
“I’m excited that really good companies may get more credit from investors than they have during the wave of glamour stocks. And investors stand to gain from the stocks’ dividend payments.”
Persaud prioritizes stocks with strong balance sheets, high potential returns on investment, and predictable cash flows. Additionally, she seeks out stocks with attractive dividend yields relative to similar companies and the broader market. Monthly dividend stocks also focus on high dividend yields, which can be a key draw. While high yields may sometimes indicate the possibility of dividend cuts or weaker balance sheets, many monthly dividend companies have been increasing their payouts for years and also maintain solid financial health. However, investors should exercise caution when investing in these stocks.
High dividend yields are not inherently negative. Stocks with high yields can still uphold strong dividend policies if their business fundamentals are solid. Many companies with above-average yields have consistently paid and even increased their dividends over time. Research indicated that, in the long run, these stocks often provide superior returns. For instance, a University of Nevada study found that portfolios consisting of the top 10 highest dividend yield stocks from the Dow 30 index outperformed those with medium and low dividend yields between 1987 and 2012. The study also highlighted that investing in high dividend yield stocks can be profitable over the long term, despite potential short-term fluctuations in returns. In view of this, we will take a look at some of the best dividend stocks that pay monthly dividends.
Our Methodology:
For this list, we reviewed a list of companies providing monthly dividends to their shareholders. Among these, we specifically chose businesses with robust dividend practices, consistently maintaining their payouts across multiple years. The majority of these selected companies operate within the Real Estate Investment Trust (REIT) sector, as they are required to allocate 90% of their income towards dividends. From that list, we picked 11 stocks with the highest number of hedge fund investors, using Insider Monkey’s Q3 2024 database of 900 hedge funds and their holdings.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
A modern city skyline with a REIT retail building at the center to symbolize the company’s reach.
Number of Hedge Fund Holders: 23
An American real estate investment trust company, Realty Income Corporation (NYSE:O) invests in single-tenant commercial properties in the country. The company is financially robust, with an investment-grade balance sheet. Its large size provides easier access to capital markets, while its strong financial position enables it to secure favorable rates on debt issued for funding growth. In addition, its size and financial stability make it easier to sell stock on Wall Street at attractive prices. The stock surged by over 21% during the third quarter and is down by over 10% in the past 12 months.
While there are many REITs in the US, Realty Income Corporation (NYSE:O) stands out as unique. Over the past 30 years, the company has weathered major events like the dot-com crash, the Great Recession, and the coronavirus pandemic, all while consistently raising its dividend. Even during the toughest year of the Great Recession, its occupancy rates never dropped below 96.6%, and they are currently around 98.7%. In short, the company’s business remains strong, and it has demonstrated its ability to perform successfully even during challenging financial times.
Realty Income Corporation (NYSE:O) is one of the best monthly dividend stocks as the company has consistently raised its payouts since its IPO in 1994. On December 10, the company increased its monthly payout by 0.2%, bringing it to $0.264 per share. This marks the fifth dividend increase this year. As of December 28, the stock has a dividend yield of 6.08%.
Parnassus Investments highlighted Realty Income Corporation (NYSE:O) in its Q3 2024 investor letter. Here is what the firm has to say:
“Realty Income Corporation (NYSE:O) is poised to benefit from lower interest rates. Because its commercial tenants are mostly on 10-year leases, the stock’s steady dividend stream is attractive in the current environment of slow deceleration in the economy with rates coming down. In this favorable backdrop, the company also continues to execute well.”
Of the 900 hedge funds tracked by Insider Monkey at the end of Q3 2024, 23 funds held stakes in Realty Income Corporation (NYSE:O), growing from 19 in the previous quarter. The total value of these stakes is more than $163.5 million. With over 1.7 million shares, AEW Capital Management owned the largest stake in the company.
Overall O ranks 6th on our list of the best stocks that pay monthly dividends in 2024. While we acknowledge the potential of O as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than O but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
