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By: Aquib Nawab
Finance
Dividend stocks have not only outperformed the S&P 500 but have also avoided losing decades, making them a reliable choice. High-yield dividend stocks, in particular, offer an appealing investment option for generating monthly income. Let's explore three companies with annual yields averaging 10.7%.
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Our first monthly dividend stock, AGNC Investment. AGNC boasts an impressive yield of 14.67% and has consistently offered double-digit yields for over a decade. While the pandemic briefly compressed its yield, it quickly rebounded to its usual levels.
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AGNC's business model is straightforward and reliable. The company borrows money at low, short-term rates and invests it in higher-yielding long-term assets, primarily agency mortgage-backed securities (MBS). These agencies, such as Fannie Mae and Freddie Mac, are backed by the U.S. government, making AGNC's investments relatively low-risk.
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AGNC's stock performance has faced challenges due to the Federal Reserve's aggressive interest rate hikes. Over the past 12 months, the stock declined by 15%. However, with the promise of future rate cuts, AGNC's stock is expected to continue its upward trajectory, having already rebounded by 40% from its lows.
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Moving on to our second high-yield monthly dividend stock, we have PennantPark Floating Rate Capital (PFLT), offering an impressive yield of 10.7%. This unique investment is a business development company (BDC) specializing in mid-tier companies.
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PFLT focuses on creating a diversified portfolio by investing in the debt of mid-tier companies. Two-thirds of its investments are in first-lien secured debt, offering better protection in case of defaults. Furthermore, the majority of its investments are in floating-rate or variable interest debt, providing insulation from rising interest rates.
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PFLT's portfolio demonstrates strong performance, with a low delinquency rate of just 0.9% among its portfolio businesses. This low risk and diversification position PFLT well, with over 100 companies in its portfolio.
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Our third monthly dividend stock, Modiv Industrial (MDV), stands out as a unique investment. This real estate investment trust (REIT) specializes in single-tenant industrial properties. It transitioned from being one of the largest non-listed REITs to becoming a public REIT in 2022.
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MDV's portfolio includes 44 properties with an average lease duration of 14 years, providing long-term stability. Notable tenants include Costco, 3M, and Cummins, adding to its appeal as a reliable monthly dividend stock.
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MDV offers an annual dividend of $1.15, distributed in 12 monthly payments, with a current yield of 7.66%. The company's dividend coverage ratio, which measures its ability to pay shareholders using net income, stands at 110%.
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