The following first appeared on Kiplingers.com as 7 Monthly Dividend Stocks for Income You Can Count On
Cash management can be one of the biggest challenges in retirement. Your bills – everything from your mobile phone service to your rent or house payment – come on a monthly cycle. When you work, and get paid every month or two weeks, that isn’t a problem. But once you retire, it can get a lot more complicated.
Sure, your Social Security payment comes monthly. But your dividend stocks generally only pay out quarterly, and bond coupon payments are typically only twice per year. This can cause your cash flows to be lumpy, which can make planning difficult. And frankly, when you’re retired, you do not want to plan cash flow with your free time. That’s what your working years were for.
This is where monthly dividend stocks come in handy.
A monthly dividend calendar better aligns with your living expenses. But the benefits actually go beyond financial planning. If you’re still working and reinvesting your dividends for growth, a monthly dividend will compound faster over time. It won’t make much of a difference in a single year or two, but over an investing lifetime, it adds up. Playing with the numbers, $100,000 invested in a stock delivering a 7% yield compounded quarterly will grow to $801,918.34 over 30 years. That same $100,000 would grow to $811,649.75, if the compounding were switched to monthly.
Today we’re going to look at seven monthly dividend stocks to reliably pay your bills in retirement. Not all pay jaw-dropping high yields – in fact, I tend to avoid exceptionally high-yielding dividend stocks, as those yields generally come with much greater risk. That high dividend won’t do you a lot of good if it gets cut tomorrow. Instead, we’re going to focus on stocks with attractive but sustainable yields.
LTC Properties (LTC)
About 86% of LTC’s portfolio is invested in properties in the skilled nursing and assisted living market, with the remainder invested in mortgages and notes backed by properties in the sector. The property portfolio is diverse, spanning 207 properties run by 29 operators in 28 states. And perhaps best of all, the properties are rented on a triple-net basis, meaning that taxes, insurance and maintenance are the responsibility of the tenants. Once the properties are operational, LTC’s responsibility is limited to collecting the rent checks.
And thankfully, most of the revenues backing those rent checks is paid by private patients and their insurers, not Medicare or Medicaid.
REIT expert Brad Thomas, editor of Forbes Real Estate Investor, recently wrote that due to the triple-net model, “There is no operator risk and the total portfolio is 52% private pay … I consider LTC a high-quality monthly dividend payer that can now be purchased at sound value.”
Since 2005, the company has raised its dividend at a 4.9% compound annual rate, well above the rate of inflation. And today, you can collect a respectable 4.8% current yield.
LTC is the sort of reliable dividend payer you want in a retirement portfolio. Its business model is simple, and demographic trends – namely the aging of the Baby Boomers – suggest healthy growth for the foreseeable future.
Read the rest of the article at Kiplingers.com
Disclosures: Charles Sizemore was long LTC at time of writing.