7 High-Yield Monthly Dividend Stocks to Buy in 2021
Speculation is running rampant in the market, and while the future isn’t certain, chances are the phenomenon will end. It really comes down to the scarcity argument. If everyone’s bidding up real estate and cryptocurrencies, for instance, very few resources are left to support equities. That’s why investors ought to consider safer investments like dividend stocks.
More specifically, people should look into funds and companies that offer monthly payouts. Monthly dividend stocks are popular with the passive income crowd because society revolves around a 30-day schedule. Whether you’re talking payments for a car, utilities or other obligations, they’re more often than not on a monthly schedule.
Monthly dividend stocks are also generally stable. When bouts of volatility impact the broader markets, they hold their value better than growth names. Of course, that’s not to say that dividend payers are immune from red ink. But issuing companies are typically more mature and thus don’t attract extreme fluctuations in either direction.
Finally, monthly dividend stocks offer a balancing effect for retail investors. Almost always, you are at a disadvantage when you trade against Wall Street pros. The big hedge funds have seemingly unlimited resources (at least, relative to you) which they can deploy at will. Also, professional traders have the financial capital to absorb hefty initial losses to drive you out of the market.
But when you bet on funds and institutions that provide a regular payout, you’re guaranteed to win something in what is otherwise a zero-sum game. As the market gets frenetic, now is an excellent time to consider these monthly dividend stocks:
- AGNC Investment (NASDAQ:AGNC)
- Prospect Capital (NASDAQ:PSEC)
- Gladstone Investment (NASDAQ:GAIN)
- BlackRock Science and Technology Trust (NYSE:BST)
- BlackRock Enhanced International Dividend Trust (NYSE:BGY)
- Chicken Soup for the Soul Entertainment (NASDAQ:CSSEP)
- Invesco Senior Income Trust (NYSE:VVR)
One note before we head in: monthly dividend stocks are not without their faults. If you’re seeking outsized capital gains, this sector probably isn’t for you due to return limitations. Underlying industry diversity is also constrained — you’re typically dealing with real-estate investment trusts (REITs) in narrow specialties. But if you’re okay with that, this segment is well worth your consideration.
Dividend Stocks: AGNC Investment (AGNC)
An internally managed REIT, AGNC Investment focuses on agency residential mortgage-backed securities (MBS) on a leveraged basis. In this context, agency means government-endorsed institutions like Fannie Mae (OTCMKTS:FNMA) or Freddie Mac (OTCMKTS:FMCC). MBS-based programs gained a poor reputation during the last housing crisis and subsequent collapse, but they’ve performed well throughout the pandemic.
AGNC stock has risen dramatically higher since the March and April doldrums of 2020. The increase was fueled largely by low interest rates that incentivized mortgage refinances. Over the trailing year, AGNC stock is up over 30%. It’s also a monthly dividend stock, with a forward annualized yield of 8.48%.
While the passive income potential is tempting, you should note that AGNC may face a major headwind soon. There is a very real possibility that interest rates will rise, which would negatively impact its MBS business. Since June 10, shares have taken a worrying dip.
My idea? Don’t buy now. Wait until AGNC stock stabilizes, then consider adding it to your portfolio.
Prospect Capital (PSEC)
Prospect Capital is a business development company (BDC) that invests across different industries, then passes some of the profit to shareholders. In most circumstances, BDCs offer investors exposure to multiple businesses without a direct investment in a particular entity.
This organization is geared toward investors seeking diversification. Prospect Capital focuses on private debt and equity investments tied to businesses, ranging from financial products to IT service providers. Additionally, Prospect has a trailing-12-month dividend yield of 8%, which is appealing during these uncertain times.
However, like AGNC above, investors should be cautious about going to0 heavily into PSEC stock right now. Instead, it might be better to wait and see if the current volatility stabilizes around the 50-day moving average.
If so, this could be one of the best monthly dividend stocks to put on your radar. Jitters about economic recovery may be applying pressure on PSEC stock but if these concerns clear up, a more confident entry point may appear.
Dividend Stocks: Gladstone Investment (GAIN)
Another BDC, Gladstone Investment is distinctive because it operates like a private equity fund. Gladstone invests in other companies through either an equity stake or debt product, thereby partnering in the target organizations’ successes (or, in some cases, failures.) Fortunately, Gladstone has achieved more of the former than the latter, as evidenced by the strong lift in GAIN stock since late October 2020.
Another factor that distinguishes Gladstone from the competition is its acquisitions. The BDC focuses on mature, lower-middle-market companies that generate between $20 million and $100 million in revenue. Theoretically, working with mature businesses should lessen its volatility.
The opportunity for passive income is attractive, with a last-12-month (LTM) yield of nearly 6%. Combine with relative stability in the charts, GAIN stock is worth assessing for your portfolio.
Still, like the others, you may want to wait and see if GAIN stock will hold above its 50-day moving average. If so, the underlying business structure makes this an enticing monthly dividend stock.
BlackRock Science and Technology Trust (BST)
Though technology is the lifeblood of our economy, tech company investments can be fraught with risk due to ever-changing market forces. But if you still want to invest in this sector while enjoying frequent passive income, you should take a look at the BlackRock Science and Technology Trust.
BST stock represents a closed-end equity fund, which means the fund can only raise capital once via an initial public offering (IPO). Once the IPO closes, no new investment capital can transfer into the fund, hence the name.
As of May 28, 70% of the trust is focused on companies located in the U.S., with the remainder spread across countries like China, the Netherlands and Canada. Investors will appreciate that BST’s top holdings include some of the biggest names in tech, such as Apple (NASDAQ:AAPL), Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) and Amazon (NASDAQ:AMZN).
Better yet, you can get exposure to these high-flying companies while receiving a hearty yield of 4.8%. In contrast, if you bought shares of AMZN stock, your yield would be 0%. This makes the case for BST very compelling compared to run-of-the-mill dividend stocks.
Dividend Stocks: BlackRock Enhanced International Dividend Trust (BGY)
Most financial advisors will guide clients toward U.S. stocks, and with good reason. Our benchmark indices have an upward bias, suggesting that over the long run, you can’t go wrong by banking on them. Plus, as a superpower and the owner of the world’s reserve currency, what the U.S. says matters to everyone else. It’s not fair, but might makes right.
Still, some investors have grown concerned about our economic recovery and the overall state of American society. Others simply want to diversify away from the mature market segments of the U.S. Whatever your motivations, the BlackRock Enhanced International Dividend Trust is worth consideration.
First, BGY stock offers an attractive yield of 6.2%. With growing uncertainty in the market — and rampant speculation — generating passive income will become more important.
Second, BGY is tied to several key international regions which may serve investors well. For instance, BGY’s majority holding is in the U.K., where experts believe the underlying economic recovery will accelerate this fall. Also, it’s tied to high-potential markets like Singapore and India, making BGY stand out among dividend stocks.
Chicken Soup for the Soul Entertainment (CSSEP)
Scouring through MarketBeat.com’s list of available monthly dividend stocks, I came across this gem: Chicken Soup for the Soul Entertainment. At first glance, I thought it was a food company. But after visiting its website, I realized it was much better than that.
Chicken Soup for the Soul describes itself as “a socially conscious company that combines storytelling with making the world a better place.” It focuses on “being as inclusive as possible in the pages of our books, publishing stories by people of all faiths, nationalities, ethnicities, sexual orientation and gender identities.” The company’s content library aims to foster understanding and bridge divides between communities.
One of the things that I’ve learned while covering millennial trends is that they’re quite serious about supporting socially responsible products and brands. CSSEP stock confirmed this dynamic, with shares gaining over 25% in the trailing year.
To be fair, CSSEP stock dipped down a bit from its highs. These Class A preferred shares are also extremely low volume, which may spark volatility fears. However, CSSEP pays out a forward annualized yield of 8.8%, which may tempt prospective buyers.
Dividend Stocks: Invesco Senior Income Trust (VVR)
Another closed-end fund, the official overview of the Invesco Senior Income Trust is unfortunately light on details. From Invesco.com, VVR’s objective is to provide a “high level of current income consistent with the preservation of capital.” Awesome.
What I will say for VVR stock is that it’s been a solid performer since last year’s stagnation. Over the past 365 days, the Invesco Senior Income Trust is up over 27%. And over the trailing month, it’s up over 4%. No, that isn’t necessarily a great number by itself. But in context, several high-yield dividend stocks have not performed well due to uncertainties regarding the benchmark interest rate.
So far, VVR has avoided the pitfalls affecting its monthly payout peers. Again, given that what’s coming next for the market is unpredictable, this is a name to monitor. At the moment, VVR features an LTM yield of 5.8%.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
