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Tags: monthly dividend stocks
OPINION

Bob Ciura: 3 High-Yield Monthly Dividend Stocks

Bob Ciura: 3 High-Yield Monthly Dividend Stocks
(Dreamstime)

Bob Ciura By Monday, 14 August 2023 12:46 PM EDT Current | Bio | Archive

Most stocks that pay dividends, do so on a quarterly basis. Some companies pay dividends on a semi-annual or annual schedule. But for investors looking for more frequent payouts, monthly dividend stocks may be appealing.

Even better, some monthly dividend stocks have high dividend yields above 8%. This article will analyze 3 high-yield monthly dividend stocks in greater detail.

Ellington Residential Mortgage REIT (EARN)

EARN acquires, invests in, and manages residential mortgage and real estate-related assets. Ellington focuses primarily on residential mortgage-backed securities, specifically those backed by a U.S. Government agency or U.S. government-sponsored enterprise.

In this way, Ellington Residential differs from most other REITs. The typical REIT owns physical properties and leases those properties to tenants. Ellington Residential does not invest in physical properties.

On May 11th, 2023, Ellington Residential reported its first quarter results for the period ending March 31st, 2023. The company generated net income of $2.3 million, or $0.17 per share. Ellington achieved adjusted distributable earnings of $2.8 million in the quarter, leading to adjusted earnings of $0.21 per share.

Ellington Residential has a few avenues of growth, which all revolve around optimizing their MBS portfolio. Capitalizing on opportunities driven by market volatility, particularly around the rate hiking cycle and quantitative tightening, could also bring growth. Additionally, Ellington will protect their book value and manage volatility through interest rate hedges and liquidity management.

Generating growth will be important for the company’s ability to maintain its high dividend payout. Shares yield nearly 15%.

Dynex Capital (DX)

Dynex Capital invests in mortgage–backed securities (MBS) on a leveraged basis in the United States. It invests in agency and non–agency MBS consisting of residential MBS, commercial MBS (CMBS), and CMBS interest–only securities.

Dynex Capital reported its second quarter financial results on July 24th, 2023. The company achieved a total economic return of $0.79 per common share, equivalent to 5.7% of the beginning book value. The book value per common share increased to $14.20 as of June 30, 2023. Dividends declared were $0.39 per common share for the same quarter. The company reported comprehensive income of $0.79 per common share and net income of $0.97 per common share.

The average balance of interest-earning assets increased by 20%, while the average balance of to-be-announced securities declined by 28% compared to the first quarter. As of June 30, 2023, the company had liquidity in excess of $561.5 million in cash and unencumbered assets. The leverage, including TBA securities at cost, was 7.7 times shareholders’ equity as of June 30, 2023.

Dynex brings to the table some competitive advantages, which could enable it to generate strong returns for investors throughout business cycles. These include the trust’s experienced management team with expertise in managing securitized real estate assets through multiple economic cycles, as well as its emphasis on maintaining a diversified pool of highly liquid mortgage investments with minimal credit risk. DX stock yields 8%.

Prospect Capital (PSEC)

Prospect Capital Corporation is a business development company, or BDC. It provides private debt and private equity to middle-market companies in the U.S. The company focuses on direct lending to owner-operated companies, as well as sponsor-backed transactions. Prospect invests primarily in first and second lien senior loans and mezzanine debt, with occasional equity investments. Prospect produces about $840 million in annual revenue.

Prospect posted third quarter earnings on May 9th, 2023. Net investment income was 21 cents per share, which was down from 23 cents in the prior quarter. Total investment income was up 19% year-over-year to $215 million. Net asset value of $9.48 per share was down from $9.94 at the end of December. Prospect noted that its net of cash debt to equity level was 47%, which is the lowest it’s been in the past decade, implying a much-improved capital structure with less risk.

Total originations fell to $91.7 million, down sharply from $308 million in the prior quarter. Total repayments in Q3 were $114 million, up from $67 million in Q2. Operating expenses were $113 million, up from $106 million in Q2, and up from $94 million in the year-ago period. We maintain our estimate of 93 cents in NII per share for this year.

The company’s payout ratio was over 100% for several years in the past decade but is slightly under that now given the increasing NII-per-share estimate. We are more optimistic that Prospect can fund the dividend indefinitely given the move up in earnings in recent quarters. PSEC shares yield over 11%.

_______________
Bob Ciura has worked at Sure Dividend since October 2016. He oversees all content for Sure Dividend and its partner sites. Bob received a Bachelor’s degree in Finance from DePaul University, and an MBA with a concentration in Investments from the University of Notre Dame.

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BobCiura
Most stocks that pay dividends, do so on a quarterly basis. Some companies pay dividends on a semi-annual or annual schedule. But for investors looking for more frequent payouts, monthly dividend stocks may be appealing.
monthly dividend stocks
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2023-46-14
Monday, 14 August 2023 12:46 PM
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