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7 Stocks to Fund a Happy Retirement

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I spend a lot time thinking about my investments. It sort of comes with the job description. But when I eventually retire, I don’t intend to spend my days with my eyes glued to a monitor. I want to retire with my mind at ease and with a steady stream of cash coming in.

To start, it absolutely must pay a respectable dividend. I buy plenty of stocks that do not pay dividends, and there is nothing wrong with that.So, what are some of the qualities I would look for in an ideal retirement stock?

Young, fast-growing companies generally have more pressing needs for their cash. But any stock I would feel comfortable holding in retirement needs to be mature enough to pay a dividend — potentially for decades.

Furthermore, that dividend should grow every year, or at least very regularly. A stock that doesn’t grow its dividend is essentially a risky bond with no set maturity date. The income it throws off won’t keep pace with inflation.

And finally, the stock should have survived a good crisis or two without cutting its dividend. If you’re planning on living off dividends, you need to have faith that they’re going to be there for you when you need them.

So with no more ado, let’s jump into my list of seven stocks to fund a happy retirement.

Realty Income

I’ll start with “the monthly dividend company,” blue-chip retail REIT Realty Income (O).

I write about Realty Income a lot. In fact, I may actually write about Realty Income more than any other stock.

And there is a solid reason for that: I consider it one of the very best dividend stocks a retiree can own. It’s about as stable and conservative as a bond while still offering regular dividend growth. Realty Income has paid 539 consecutive monthly dividends, and has raised its dividend for 71 consecutive quarters.

Not every dividend hike is newsworthy, but Realty Income has managed 5% compound annualized dividend growth for 20 years and running. That’s well ahead of inflation and certainly enough to guarantee a happy retirement.

So, what is the secret to Realty Income’s stability?

Realty Income isn’t really a “company” as you might think of one. It’s a passive landlord with a portfolio of more than 4,300 properties. As a triple-net REIT, the tenants are responsible for all maintenance, taxes and insurance, and Realty Income has a long history of leasing to stable tenants.

Realty Income’s stock price has faltered in 2015, falling in sympathy with bonds and other income-producing assets. If you’re looking to retire happy, use this as a buying opportunity in one of America’s finest divided payers.

Ventas, Inc

Along the same lines, we have one of the bluest of blue-chip REITs, Ventas, Inc. (VTR).

With a market cap of $21 billion, Ventas is one of the largest holdings in most REIT index funds, and it’s one of the few REITs to make it into the S&P 500.

With Ventas’ size comes stability and financial strength, but that doesn’t mean that Ventas is wanting for growth. The stock has generated total returns of about 26% per year over the past 15 years.

As a diversified health REIT, Ventas is a nice play on the aging of the Baby Boomers. About half of Ventas’ portfolio is invested in senior housing. Another 18% and 17%, respectively, is invested in medical office buildings and skilled nursing facilities with the rest invested in hospitals and assorted loans and other properties.

After the general selloff in the REIT sector, Ventas now sports a very attractive dividend yield of 5%. And importantly, Ventas is also a serial dividend raiser. Ventas has grown its dividend at a 7.9% annual clip over the past five years and an 8.0% clip over the past 10 years.

A demographically-favored portfolio with a long history of raising dividends? If that isn’t a stock to help you retire happy, I don’t know what would be.

McDonald’s

My next “happy retirement” stock is the seller of the Happy Meal:McDonald’s (MCD).

In this age of organic eating, McDonald’s has become something of a pariah stock. It hasn’t quite reached the notoriety of Big Tobacco … or even of agribusiness giant Monsanto (MON). But it’s hard to find a company more disdained by the chattering classes than good ol’ Mickey D’s.

But remember, tastes are always changing in America, and this is not the first time that McDonald’s has been distinctly out of style. McDonald’s is a survivor, and as Americans’ tastes have changed, so have McDonald’s menu offerings.

So, why do I like McDonald’s as a happy retirement stock?

More than anything, it comes down to the dividend. McDonald’s has raised its dividend every year since 1977, and its dividend has grown at an eye-popping pace over the past decade. Over the past 10 years, McDonald’s has grown its dividend at a 19.5% clip. Dividend growth has been a little more modest recently, growing at a 9% clip over the past three years.

But 9% growth is just fine in my book. McDonalds is a champion dividend payer, and you can buy it today with a 3.5% dividend yield.

StoneMor Partners

Unless you read about it from me, chances are good that you’ve never heard of StoneMor Partners, LP (STON). StoneMor is in a line of work that a lot of people find downright creepy. It owns and operates 303 cemeteries and 98 funeral homes across the United States and Puerto Rico.

In our golden years, there are a lot of things we’d prefer to think about other than caskets and tombstones, but Stonemor’s dividend is far from gloomy. At current prices, it yields about 8.2%.

StoneMor consistently raises its dividend, though the rate of growth is a little more modest than for some of the other companies I’ve mentioned. Over the past five years, it has raised its dividend at a 1.9% clip. That’s nothing to write home about, but I will add that it is has more than kept pace with inflation over the period.

I expect that the growth rate is about to pick up. Based on current life expectancies, the number of annual deaths in America will rise by more than 80% between 2015 and 2035, due to the aging of the Baby Boomers. Even allowing for an increased preference for cremation over traditional burial, there is an incredible amount of growth all but guaranteed.

If you want to retire happy, buy StoneMor and collect the dividend.

Kinder Morgan Inc

Next up is oil and gas pipeline operator Kinder Morgan Inc (KMI), one of my very favorite dividend stocks.

Kinder Morgan owns and operates the largest network of oil and gas pipelines in North America, and with its size comes stability and diversification. So long as America needs oil and gas moved from point A to point B, Kinder Morgan should do quite nicely.

Whenever I invest, I like to know who’s running the show. No matter how great a company looks on paper, you still have to trust that the people running it are competent and honest.

Well, Kinder Morgan is run by one of smartest men in the energy industry, Richard Kinder, who also happens to be one of the “good guys” in corporate America. Kinder receives no salary for his work as chairman, and he even reimburses the company for his health insurance. His only compensation comes from the dividends he receives as a shareholder, though as the owner of 234 million shares, Mr. Kinder is doing just fine. He takes home $400 million per year in dividends.

At current prices, Kinder Morgan sports a dividend yield of 5.1%, and management expects dividend growth in the ballpark of 10% over the next five years.

Enterprise Products Partners

Along the same lines, we have Enterprise Products Partners (EPD), the only MLP that can rival Kinder Morgan in terms of size, scope, and diversification. Enterprise Products operated 51,000 miles of oil and gas pipelines in additional to extensive salt-dome storage capacity and marine transportation.

Anything energy related is going to give investors heartburn these days, but most of Enterprise Products’ income is fee-based, depending on the volume of oil and gas transported rather than the price.

After a fantastic run since 2008, EPD stock has hit the skids since last September and is now down by more than a quarter from its 52-week high. Given its current size, Enterprise probably can’t realistically generate the kinds of returns going forward that investors have become accustomed to.

But with a current distribution of 5% and a long history of raising that distribution, Enterprise looks like a decent bet at today’s prices.

ExxonMobil

And finally, we get to the ultimate oil major, ExxonMobil (XOM). I should be clear that I don’t expect ExxonMobil stock to do much over the next few months. Exxon is down about 20% from its 52-week highs set before last year’s oil-price collapse, and I expect it to recover nicely … eventually.

But for that to happen, the price of energy needs to stabilize, and that may very well take a while.

In the meantime, investors would be wise to average in to Exxon on any large dips. Exxon is one of the safest dividend payers in existence, having raised its dividend for 32 consecutive years and counting. Exxon even managed to continue growing its dividend during the dark days of the 1980s and 1990s, when energy prices slumped into a two-decade bear market.

At today’s prices, Exxon yields about 3.5%. And over the past decade, Exxon has raised its dividend at a 10% annual clip.

Is that kind of growth realistic with oil priced where it is today? Probably not. But even if dividend growth comes in at half that rate over the next decade, that’s still pretty solid and more than enough to ensure a happy retirement.

Charles Lewis Sizemore, CFA, is chief investment officer of the investment firm Sizemore Capital Management and the author of the Sizemore Insights blog. 

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Target Proves Its Mettle as a Dividend Growth Stock

Target’s (TGT) latest dividend announcement got a lot of attention for its bungled delivery. It published the news of its dividend boost before the board of directors had actually sat down to vote on it.

Oops. I suppose it would have been embarrassing—and detrimental to Target’s stock price—if the board had opted not to approve the dividend hike. But that’s rarely a problem for Target. You see, Target is one of the most reliable dividend raisers in America, which is a major reason I own it in my Dividend Growth Portfolio. Let’s dig into the details.

Target raised its quarterly dividend by 7.7%, from 52 cents per share to 56 cents. This is 44th consecutive year that Target has bumped its dividend. Not a bad run indeed.

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The 7.7% increase isn’t a bad hike given the weakness in the retail sector this year. But it’s one of the skimpier dividend hikes Target has made in a long time. This time last year, Target hiked its dividend by 20.6%. And over the past ten years, Target has managed annual dividend growth of 20.2% per year.

What’s impressive about Target’s dividend growth is its consistency. Those 20% annual gains are not the result of large increases years ago that skew the averages today. Over the past three and five-year periods, Target has generated dividend growth of 20.0% and 23.4%, respectively.

Target’s dividend yield today, at current share prices, is 2.8%. That might not sound particularly high, but remember, the 10-year Treasury still only yields a measly 2.3%.

Let’s now take a look at how that dividend growth affects investor returns. One of my favorite metrics is “yield on cost.” This is effective dividend yield you receive on your original purchase price (Current annual dividend per share / purchase price). If you had bought Target three years ago and held until today, your yield on cost would be 4.5%, about in line with the current yields on many REITs. If you had bought Target five years ago and held until today, you’d be enjoying a yield on cost of 7.4%, which is more than most junk bonds pay today. And if you had bought Target ten years ago and held until today, you’d be looking at a yield on cost of 16.5%… a yield you’d be lucky to find in a distressed mortgage REIT these days.

I know, I know. “Past performance is no guarantee of future results,” and we have no way of knowing if Target’s next ten years will be as generous to shareholders as the previous ten. But given Target’s track record here, I’m giving the company the benefit of the doubt.

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And in case you needed an additional sweetener, dividends are not the only way that Target shares its largess with shareholders.  In the same announcement, Target announced it was expanding its $5 billion share repurchase program to $10 billion. Since 2004, Target has reduced its shares outstanding by more than 37%.

Charles Lewis Sizemore, CFA, is chief investment officer of the investment firm Sizemore Capital Management and the author of the Sizemore Insights blog.

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7 Cheap Dividend Stocks Trading for Less Than $10

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“Price is what you pay. Value is what you get”

Warren Buffett

“Price” and “value” are often two very different things. Though a single share cost more than $200,000, Buffett’s Berkshire Hathaway (BRK-A) is considered a value stock by many. Yet Twitter (TWTR), which trades hands for just $35 per share, is often called a bubble stock.

Yet low-priced stocks are a hunting ground for some very smart, very successful investors. Joel Tillinghast, manager of the Fidelity Low-Priced Stock Fund (FLPSX), is one of the most successful fund managers of his generation, and he invest almost exclusively in stocks trading for less than $50 per share.

InvestorPlace Editor Hilary Kramer, author of Big Profits from Small Stocks takes it a step further, focusing on stocks trading for less than $10 per share.

As Kramer points out, most “big money” institutional investors are prohibited from buying stocks priced at less than $10. And even if they have the ability, few have the intestinal fortitude. Their own research departments generally won’t cover the stocks, and it’s a career risk to buy a stock that is too far out of the mainstream.

But the rationale for buying a stock with a single-digit price tag is straightforward. Due to the mechanics of the market, it’s generally a lot easier for a $5 stock to go to $10 than for a $50 to go to $100. Yes, the percentages are the same.  But lower-priced stocks are often low-capitalization stocks as well. A large investor moving into a small cap stock is going to move the price a lot more that he would in a large, liquid stock with an enormous float. The key is finding these gems before the big boys do.

Today, we’re going to take a look at seven cheap dividend stocks trading for under $10. All have a few bumps and bruises on them; you simply don’t get this kind of pricing otherwise. But all are also solid dividend payers worth a good, hard look.

Banco Santander

With Greece likely to default and send shockwaves through the Eurozone, a European bank might seem like an odd choice of investment. Yet Banco Santander (SAN) is one of biggest, best managed and most globally diversified banks in the world.

Its US-traded ADR also happens to sell for just $7.26 per share.

At current prices and exchange rates, Santander’s €0.40 expected 2015 dividend works out to a yield of about 6.3%.

Santander cut its dividend earlier this year, as incoming Executive Chairman Ana Botín make boosting the bank’s capital cushion a top priority. That diluted existing shareholders—which is part of the reason the shares trade at the bargain prices they do today—but it also made Santander a safer, more conservative bank going forward.

An unruly default in Greece will probably rattle Santander’s stock. If it does, use the volatility as an opportunity to load up on a cheap stock with a fantastic dividend.

And here’s one more thing worth mentioning. Legendary contrarian value investor David Dreman has recently become a strong buyer. Dreman initially purchased Santander in 2010 and has grown his share count from 111,820 shares to 631,135 as of last quarter.

Prospect Capital

I’ve written quite a bit about business development company Prospect Capital (PSEC) lately (see “A Look at the Most Hated Stock on Wall Street“).

There’s a reason for that. At current prices, around $7.70, I consider it one of the best bargain stocks in America today. The stock trades at a 25% discount to book value… a book value that was just reaffirmed this past quarter. To put that in perspective, its peers in the BDC sector trade at an average discount to book value of just 6%. The last time Prospect Capital was this cheap, it returned 60% in capital gains and dividends over the following 12 months. Even if we got only half that return this time around, that would be a fantastic return we’re not likely to find too many places in today’s overpriced stock market. 

Prospect Capital’s dividend, which is paid monthly, works out to a 13% dividend yield at today’s prices. And I expect the dividend to be safe for at least the next 9-12 months. Prospect Capital cut its divided last year as part of a larger strategy to de-risk the company. While the dividend cut was not popular with investors — and is a big reason why the stock trades at the discount it does today — it was the only sensible move. Management wanted to avoid reaching for yield, risking defaults and ultimately putting the company at risk.

The good news is that, with the dividend cut out of the way, investors can feel a lot more comfortable with today’s very attractive payout.

American Realty Capital Properties 

It may be a little controversial to include American Realty Capital Properties (ARCP) on this list. ARCP temporarily suspended its dividend late last year as it dealt with the fallout from its accounting snafu. (For a review of ARCP’s accounting saga see “Accounting Irregularities knock down ARCP: Buying Opportunity or Enron Part II?“)

ARCP’s management has been somewhat vague about when the dividend will be reinstated, though most analysts that follow the stock expect it by later this year.

While they are waiting, investors can buy an inexpensive REIT loaded up with high-quality retail properties trading for just $8.66 per share.

Accounting scandals are an ugly affair and bring to mind the unfortunate Enron affair. But after its travails and subsequent audits, ARCP may very well now have the cleanest and most conservative accounting books in America. But because investors are still wary of the stock, we can get it at a fantastic price. Shares of ARCP trade for just 86% of book value. To put that in perspective, Realty Income (O) — considered by most analysts to be the blue chip in the triple-net retail REIT sector — trades for 202% of book value.

It might be a while before investors award ARCP a similar valuation. But buying at today’s prices, we have a wide margin of safety. And once the dividend is reinstated, I would expect a dividend yield somewhere in the ballpark of 5%-7% based on today’s prices and perhaps even higher.

Lexington Realty Trust 

Up next is another REIT that has taken its knocks, Lexington Realty Trust (LXP). Lexington trades for just $9.34 per share and sports a 7.6% dividend yield.

As with the rest of the REIT sector, 2015 has not been kind to Lexington. As recently as January, it was trading for $11.69 per share. Fears of Fed tightening have taken a wrecking ball to bond prices and to the prices of “bond like” investments like high-yielding REITs. So the sell-off in Lexington shares has relatively little to do with the REIT itself and a lot to do with macro concerns about interest rates.

But even so, Lexington is cheap relative to its peers. According to REIT guru Brad Thomas, Lexington has one of the lowest price/FFO multiples in the REIT universe at just 8.9. To put that in perspective blue-chip Realty Income trades at a price/FFO multiple of 17.6.

Lexington is a riskier REIT than Realty Income and should trade at a modest discount. But the discount we see today is anything but modest. At today’s prices, Lexington would seem too good to pass up.

Fortress Investment Group 

Going a very different direction, we come to private equity manager Fortress Investment Group (FIG). Despite the size of its business — Fortress has $70 billion under management scattered across various funds and strategies — Fortress trades for just $7.71 per shares and yields a respectable 4.2% in dividends.

Fortress is best known as a private equity manager, and the firm’s biggest investments in this space are in transportation, infrastructure, financial services and senior living. But private equity only accounts for for about $15 billion of Fortress’s total assets under management. Fortress also manages about $14 billion in distressed debt funds and about $8 billion in aggressive hedge fund strategies. But the bulk of Fortress’s business — at $33 billion in assets — comes from good, old-fashioned plain-vanilla bond portfolios.

Fortress’s stock price has struggled over the past two years and has been choppy and volatile since coming out of the 2008 meltdown. But Fortress has beaten the pants off the S&P since the beginning of 2009, generating returns of 244% to the S&P 500’s 138%. And those figures don’t include Fortress’s higher dividend.

Fortress, like the rest of the financial sector, might have a hard time navigating the Fed’s coming tightening cycle. Only time will tell. But at $7.71, the shares might be worth a stab.

TransAlta Corp 

Next up is Canada-based utility TransAlta Corp (TAC), a non-regulated power generation company with operations in the United States, Canada and Australia.

TransAlta owns and operates hydroelectric, wind, natural gas and coal-fired facilities. It also actively trades electricity and other energy-related commodities and derivatives.

TransAlta has had a rough run. As recently as two years ago, shares traded hands for more than $14 per share. Today, shares fetch just $7.99.

TransAlta’s dividend will appear wildly variable to American investors. That’s because, as a Canadian company, it declares its dividends in Canadian dollars. TransAlta’s dividend has been set at 18 Canadian cents per quarter since April 2014. At current exchange rates, that works out to 14.6 U.S. cents for a dividend yield of 7.3%.

That’s not too shabby. Though be warned, TransAlta aggressively cut its dividend in 2014 from 29 Canadian cents per quarter.

Braskem SA 

And finally, we get to Brazilian chemical producer Braskem SA (BAK)You can roughly think of Braskem as the Brazilian equivalent of Dow Chemical (DOW), though it specializes specifically in petrochemicals. And speaking of “petro,” Braskem is an affiliated company of Brazilian oil major Petrobras (PBR), which partially explains why the share price has plunged to the depths that its has. Petrobras was embroiled in a corruption scandal last year that still threatens to bring down the presidency of Dilma Rousseff.

At time of writing, Braskem traded for $8.58 after trading as high as $15.59 last November. The dividend yield is a respectable 4.4%.

Your biggest concern with Braskem is Brazil’s macro stability. The Brazilian economy is slowing, even while inflation is on the rise. It’s the modern-day version of 1970s stagflation, and it isn’t pretty.

All the same, Brazilian stocks are cheap, and strength in the Brazilian real due to central bank tightening should be good for holders of the American ADRs. Consider Braskem a high risk but potentially very high return play on a Brazilian return to macro stability.

Charles Lewis Sizemore, CFA, is chief investment officer of the investment firm Sizemore Capital Management and the author of the Sizemore Insights blog. As of this writing, he was long ARCP, O, PSEC and SAN.

Photo credit: J M EII

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Dividend Smackdown: REITs vs. Utilities

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This year has proven to be a rough one for dividend stocks. With the Fed’s rate hike looming and with bond yields rocketing higher, traditionally high-yielding sectors like REITs and utilities have taken an absolute pounding. The REIT sector, as represented by the Vanguard REIT ETF (VNQ), is down more than 13% from its January highs and is well into negative territory for the year. Many REITs are down more than 20%, putting them into outright bear market territory.

Utilities have actually fared a little worse. The Utilities Select SPDR ETF (XLU) is down close to 14% from its January highs. And as with REITs, many individual utility stocks are down significantly more.

After a good correction, it’s always worthwhile to look for bargains. So today, we’re going to pit REITs against utilities to see which is the better dividend play for the remainder of 2015. We’ll judge the winner of this smackdown on three criteria: Current dividend yield, dividend growth, and overall macro backdrop.

Dividend Yield

It can get a little messy when comparing yields across sectors because most investors do not simply buy the index. They cherry pick the individual stocks they like best, which can have yields that are markedly different from the average for the sector. So, we’ll look at both the index averages and at some individual names that investors are likely to own.

At current prices, VNQ yields 3.8%, beating out XLU’s 3.5%. But it’s only fair to note that both sectors out-yield Treasuries by a decent margin. As of this writing, the 10-year Treasury yielded a pitiful 3.3%.

Let’s take a look at the portfolios of each. VNQ’s largest holding by a wide margin is Simon Properties Group (SPG), which makes up more than 8% of the portfolio. Public Storage (PSA) and Equity Residential (EQR) round out the top three at 4.1% and 3.8% of the portfolio, respectively. None of these three are particularly high yielders, with current dividend yields of 3.4%, 3.6% and 3.1%, respectively.

In my view, Realty Income (O), LTC Properties (LTC) and Ventas (VTR) are better options as buy-and-hold dividend stocks. At current prices, they yield 5.0%, 4.9% and 4.9% respectively, and all have long track records of raising their dividends.

Now let’s dig into XLU’s holdings. Duke Energy (DUK), NextEra Energy (NEE) and Dominion Resources (D) dominate the portfolio. Of these, Duke is the highest yielder with a 4.4% dividend. NextEra and Dominion yield a less impressive but still competitive 3.1% and 3.9%, respectively. But for a higher yield, you might consider Southern Company (SO), with its 5.1% yield, or Gas Natural (EGAS), with its 5.4% yield.

Dividend Yield: Advantage REITs

 

Dividend Growth

Comparing dividend growth between ETFs can be a little messy. You have to remember what an ETF is: It’s a collection of companies, each with its own dividend payment schedule. To smooth this out, I took an average of the dividends paid over the trailing four quarters and compared to the average from the prior year. And here’s what I found.

Dividend growth in the utilities sector has been pretty modest. Over the trailing four quarters, XLU’s payout grew by 3.5%.  And going back to 2011, year-over-year growth has ranged from a little less than 0% to a little less than 8%. That’s more than enough to keep pace with inflation, but not enough to really excite me.

Now, let’s look at REITs. VNQ’s dividend rose by nearly 10% over the trailing four quarters, and going back to 2011 its average growth has been about 11%.

Utilities have seen decent enough dividend growth, and a utility stock is still a better option than a bond in my view. But REITs have clearly beaten the pants off of utilities in terms of dividend growth, and I expect that to continue going forward.

Dividend Growth: Advantage REITs

 

Macro Conditions

This brings me to the final criterion, the overall macro environment. With the deregulation of recent decades, utilities are not quite as hamstrung as they used to be and often have more flexibility to pass on rising energy costs to consumers. But this remains a regulated industry, and that ability is by no means absolute. Utilities, uniquely among industrial sectors, are still subject to political whims.

And making it worse is the growing popularity of self sufficiency via solar energy. The falling cost of solar panels is an absolute disaster for the utilities industry. Not only does it remove would-be paying customers, but it also forces the utilities to buy relatively expensive excess productions from households with solar panels, all while guaranteeing capacity during peak hours or during periodic shortages of solar energy. All in all, utilities are operating in a difficult environment that only promises to get more difficult.

REITs have none of these issues, and the macro environment actually looks good for REITs. Rising bond yields raise borrowing costs, but a growing economy should translate to higher property prices and higher rents.

Macro Conditions: Advantage REITs

In this dividend stock smackdown, REITs are the hand-down winner. They beat utilities in terms of both current yield and dividend growth, and they face none of the complicated macro issues that utilities face.

Charles Lewis Sizemore, CFA, is chief investment officer of the investment firm Sizemore Capital Management and the author of the Sizemore Insights blog. As of this writing, he was long VNQ, O, LTC, VTR.

Photo credit: Alex Eylar

 

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5 Monthly Dividend Stocks To Pay Your Bills

Part of my job as an advisor is helping my clients sort out their finances. But even though I do this professionally, I sometimes have a hard time sorting out my own finances because my expenses are out of sync with my income. My regular expenses tend to be monthly, whereas my income is mostly paid quarterly.

That’s always been a major source of frustration to me, and it is no doubt a major source of frustration to millions of retirees living off of their investments. Bonds generally pay interest just twice per year, and most companies pay dividends quarterly. But our home mortgages, car loans, and credit card bills are due monthly.

Well, I have a solution to this problem: monthly dividend stocks. Today, I’m going to share five monthly-paying dividend stocks that you can bank on to pay your monthly bills.

We should never buy a stock purely because its dividend is paid monthly. Dividend safety and growth are far more important considerations, and the following list has plenty of both.

LTC Properties Inc 

I’ll start with LTC Properties Inc (LTC), one of my favorite plays on the aging of the Baby Boomers.

If you want to know what LTC does, just look at its name: “LTC” is short for “long-term care,” something that millions of Baby Boomers will be needing in the years ahead. 8,000 baby boomers turn 65 years old with every passing day, making this one of the most powerful trends in the world today.

LTC Properties invests in properties for providers or skilled nursing, assisted living, independent living and memory care. It also invests in mortgages secured by long-term care properties.

Roughly four-fifths of LTC’s portfolio is invested in properties, with the remainder in mortgages.

LTC currently yields 4.9% in dividends, which is very competitive among medical REITs. And importantly, if you want to make sure your monthly income continues to match your monthly expenses, LTC is a serial dividend raiser. LTC has hiked its dividend at a 5.5% annual clip over the past five years.

A monthly dividend payer with a track record of raising its dividends that also happens to be invested in one of the most powerful macro trends in the world… If you can think of a better stock to include in a retirement portfolio, let me know. I’d love to hear it.

Realty Income 

No list of monthly dividend stocks can be complete without the company that calls itself “the monthly dividend company” on its own website: Blue-chip retail REIT Realty Income (O)

I write about Realty Income quite regularly, and there is a reason for that. I consider it one of the very best dividend stocks a retiree can own. It’s about as stable and conservative as a stock can be, while still offering regular dividend growth. Realty Income has paid 538 consecutive monthly dividends, and has raised its dividend for 70 consecutive quarters. Not every dividend hike is a large one, but the stock has managed 5% compound annualized dividend growth for 20 years and running. That’s well ahead of inflation.

How can I be so confident in Realty Income’s stability?

To start, Realty Income isn’t really a “company.” It’s a mostly passive landlord with a portfolio of more than 4,300 properties, most of which are high-quality, high-traffic retail sites. A Walgreens (WBA) or CVS (CVS) pharmacy is a “typical” property for Realty Income.

Furthermore, Realty Income’s properties are leased on a triple-net basis, meaning that the tenants are responsible for paying all maintenance, taxes and insurance.

Realty Income’s stock price has taken a beating in 2015, down nearly 20% from its recent fears due to investor concerns about rising bond yields. Use this as a buying opportunity in one of America’s finest divided payers.

American Realty Capital Properties Preferred Stock 

Next up is actually not a common stock but a preferred stock. I’m recommending American Realty Capital Properties 6.7% Cumulative Preferred Shares (ARCPP).

This might take a little explaining. “Preferred stock” is actually more similar to a bond that to common stock. Shareholders have no voting rights and buy these primarily for income. And while dividend payments are not guaranteed in the sense that bond interest is, it takes priority over common stock dividends. Furthermore, some preferred stock—including this one—have provisions that make them cumulative. In other words, if the company skips a preferred dividend for any reason, they have to play “catch up” and pay the preferred stockholders their cumulative past dividends before they can offer a dividend to common shareholders.

So, why am I recommending the preferred shares of American Realty Capital and not its regular common stock?

There are a couple reasons. To start, American Realty Capital Properties common stock (ARCP) does not currently pay a dividend. It was suspended last year due to an accounting snafu. I expect that the dividend will be reinstated this year, but as of this writing ARCP does not pay a dividend.

Meanwhile, ARCPP pays a massive 6.7% coupon. At current prices, that amounts to a yield of almost 7%.

Will you get dividend growth here? No, you won’t. That coupon payment won’t change. But with a yield of almost 7%, I’m ok with that.

Prospect Capital

I may get hate mail for the next recommendation, but here me out. For a slightly riskier monthly payer, I recommend you consider shares of Prospect Capital (PSEC).

Earlier this week, I wrote that Prospect Capital is “the most hated stock on Wall Street.” As a value investor, that should get your blood pumping, but as a conservative income investor that might cause you to take a step back. Let me explain.

Prospect Capital is a business development company (“BDC”) that primarily makes loans to small and medium sized businesses. It essentially does what banks used to do back when banks actually lent money. Prospect lowered its risk profile last year, not wanting to “reach for yield,” so to speak. But less risk also meant less return, so Prospect had to cut its dividend.

I’m normally reluctant to recommend a company that has recently cut its dividend because, like cock roaches, there is never just one. But in Prospect’s case, the dividend cut made sense to me, and our risk is mitigated in my view by two things. Firstly, the stock is insanely cheap, trading at just 70% of book value. And secondly, Prospect Capital’s executives have been buying the stock on the open market hand over fist (see insider trading table at the bottom of this article for the full list).

At current prices, Prospect yields nearly 14%. Yes, this is a riskier play that, say, Realty Income. But I also expect it to be a fantastic performer over the next 6-12 months.

Main Street Capital

And finally, I’d like to recommend Main Street Capital (MAIN). Like Prospect Capital, Main Street is a business development company. Main Street provides debt and equity financing to small and medium sized businesses. Think of it as a publically-traded private equity company.

Main Street pays a modest monthly dividend of $0.175 per month, but twice per year it also generally pays a larger dividend based on its operating results. This allows Main Street to keep its base dividend stable, which is exactly what you want with a stock you’re using to fund your monthly expenses. Based on its regular dividend, Main Street yields about 6.6% at current prices. But including the irregular dividends gets you to a yield of about 8.4%. Not too shabby.

Main Street had to cut its dividend during the pits of the financial crisis. But it has been growing it steadily since 2011.

Charles Lewis Sizemore, CFA, is chief investment officer of the investment firm Sizemore Capital Management and the author of the Sizemore Insights blog. As of this writing, he was long ARCP, LTC, O and PSEC.

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