7 monthly dividend stocks with large yields

These stocks may carry risk, but they offer regular income and yields of more than 7%.

  • By Jeff Reeves,
  • U.S. News & World Report
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There are many high-quality dividend stocks out there, but typically they only pay investors on a quarterly basis. And sometimes, dividend payers only offer one distribution to shareholders in an entire year. There's a group of stocks that buck this trend, however, and offer monthly payouts – and within that universe, there is an even smaller list of monthly dividend stocks that deliver frequent paydays with impressive annualized yields of more than 7% based on current payouts and share prices. These stocks may be risky, deploying capital aggressively to deliver those kinds of dividends, but if you're not afraid of this business model, then these seven monthly dividend stocks are worth a look.

AGNC Investment Corp.

Maryland-based AGNC (AGNC) is structured as a real estate investment trust, or REIT, which is a special class of stock that must deliver 90% of taxable income back to shareholders via dividends.The company is unique because it primarily invests in mortgage-backed securities instead of physical real estate. It also is focused almost solely on home loans backed by the U.S. government through entities such as Fannie Mae and Freddie Mac. As we saw in 2008, the housing market is never a sure thing. That said, this backstop from Uncle Sam helps to provide a bit more certainty to AGNC's operations and its monthly payouts.

Current yield: 8.9%

Dynex Capital

Dynex Capital (DX) is another REIT, and it's a good example of how some monthly dividend payers use "leverage" or aggressive lending to turn a portfolio of investments into a stream of significant income for shareholders. Dynex focuses mostly on "agency" mortgages backed by the U.S. government, but it also invests in riskier non-agency mortgage debt without a federal backstop for payments. These risks do offer a higher rate of return, however, so investors who really want to get paid with their monthly dividend stocks may want to consider DX.

Current yield: 8.1%

Gladstone Capital Corp.

Gladstone (GLAD) has a similar operation, but from a business-focused perspective. GLAD is a financial firm that aims to create big profits for shareholders by investing in corporate debt rather than residential mortgages. It focuses on small and mid-sized companies through loans ranging from $7 million to $30 million with terms of up to seven years. The current list of GLAD investments includes aerospace companies, digital marketing firms, electronics manufacturers, chemical companies, real estate firms, software companies and more. The result is a diversified debt portfolio that delivers consistent payouts for the company's shareholders on a monthly basis.

Current yield: 7.8%

Horizon Technology Finance Corp.

Horizon Technology Finance (HRZN) had a rough 2020 in many ways, but in February 2021, the stock hit a multiyear high on improved optimism around its growth-oriented investment operations. As the name suggests, the company provides financing to tech startups. However, this is not just the consumer tech applications that may immediately spring to mind. Recent investments include gene therapy biotech Mustang Bio and marketing tech firm PebblePost. As these startups grow and thrive, they deliver profit-sharing and debt payments back to Horizon that fuel 10-cent monthly dividends that have been paid steadily since 2016.

Current yield: 8%

Pembina Pipeline Corp.

Pembina (PBA) is a "midstream" energy company that operates pipelines, storage facilities and other transportation infrastructure that mainly serve the fracking segment of the North American oil and gas industry. Right now, PBA boasts pipeline capacity of 3.1 million barrels of oil, ground storage of 11 million barrels and rail terminalling capacity of roughly 145 thousand barrels of oil equivalent. As if that weren't substantial enough, the firm also has 21 million barrels of "cavern" storage where natural gas is kept underground. Though technically a foreign entity as it is headquartered in Calgary, Canada, this is a familiar energy business that can provide steady and generous dividends to U.S. investors.

Current yield: 7.6%

Prospect Capital

Prospect (PSEC) may have taken a dive in early 2020 after fears of the pandemic roiled Wall Street, but shares have almost doubled since those lows and recently hit the highest levels since mid-2017 on continued recovery hopes. PSEC has been paying a 6-cent monthly dividend to shareholders like clockwork since 2017 thanks to a diverse portfolio of investments that includes everything from consumer goods manufacturers to energy companies to health care firms. That diversification helps to smooth out volatility a bit, and the track record of payouts and huge yield at present certainly make PSEC a monthly dividend stock to watch.

Current yield: 9.7%

Stellus Capital Investment Corp.

Stellus Capital (SCM) was a popular monthly dividend stock until last year, when it temporarily disrupted its dividend frequency. Shares collapsed, and even now in 2021, the stock hasn't gotten back to pre-pandemic levels. However, last month, Stellus announced its transition back to monthly payouts this year. What's more, the company raised $100 million in January in a well-timed move to invest in the economic recovery as vaccines begin to roll out. There's a lot of risk, obviously, given the history of this business development company and its portfolio's recent struggles. That said, the timing may be very good for those who don't mind a little risk in the pursuit of outperformance.

Current yield: 8.5%

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