3 Stocks That Cut You a Check Each Month

For the most part, dividend-paying stocks dole out dividends to investors on a quarterly basis. With monthly dividend stocks, as the name suggests, investors receive dividends monthly.

If you are an investor looking to generate income from your portfolio, monthly dividend stocks are an appealing choice. Even if you're looking to grow your portfolio over time, receiving cash payments on a monthly rather than quarterly basis allows you to reinvest dividends more frequently.

AGNC Investment (NASDAQ: AGNC), Main Street Capital (NYSE: MAIN), and Realty Income (NYSE: O) are three of the most popular monthly dividend stocks. Let's explore each one and see whether other factors bolster or diminish their appeal as long-term investments.

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High-yielding mortgage REIT AGNC Investments remains risky

On paper, AGNC Investments may seem like a seamless way to generate double-digit annual returns. Shares of the mortgage REIT have a forward dividend yield of 13.1%. However, it's not like you can buy AGNC, set it and forget it, allowing it to do the heavy lifting as one of the high-yield dividend stocks.

As AGNC borrows short-term funds to buy longer-term mortgage-backed securities, it is highly sensitive to changes in interest rates. In more recent years, with interest rates spiking, the mortgage REIT has experienced lower net interest spreads, as well as capital losses on its portfolio. As a result, AGNC's dividend has fallen over time, going from $0.20 per share monthly 10 years ago to $0.12 per month today.

Shares have also fallen by over 31% over the past five years. This has eaten into AGNC's total returns. More recently, AGNC shares had been rising on the expectation of further Federal Reserve interest rate cuts. However, as recent events call into question the prospect of further rate cuts this year, the stock could once again be subject to volatility.

Main Street Capital is a high-quality BDC with a high yield

Main Street Capital is one of numerous business development companies, or BDCs. Similar to REITs, BDCs are tax-advantaged entities, distributing 90% of their earnings, but unlike REITs that invest in real estate, BDCs make debt and equity investments in typically small, privately held businesses.

What makes Main Street stand out from other BDCs? Beyond it being one of the larger ones out there, with a market cap of over $5 billion, Main Street Capital is a strongly capitalized BDC, with an issuer-grade credit rating. The BDC's internally managed status also means lower operating expenses compared to externally managed BDCs. When you consider how Main Street also manages outside capital, its effective expense ratio is even lower, with its asset management business providing an additional revenue stream for Main Street's investors.

As a result, Main Street Capital provides a high dividend, paid monthly. The BDC currently has a forward dividend of nearly 5.5%. Main Street only has a five-year track record of consecutive dividend increases, but during this time frame, the BDC has raised it by an average of 8.2%.

Realty Income offers a monthly payout, plus a decades-long record of steady growth

Realty Income isn't afraid to promote its status as a monthly dividend stock. However, that's not the sole reason to consider it one of the best monthly dividend stocks.

Realty Income focuses on sale-leaseback properties. That's where major tenants like retail stores and restaurants sell their physical buildings to Realty Income, which then leases them back under triple net leases, where the tenant is responsible for property-level expenses and taxes.

Diversified globally, with over 15,000 properties under its ownership, the REIT owns a portfolio that's diversifed enough to remain generally stable in terms of earnings. Realty Income has not missed a monthly dividend payment since going public in 1994. The REIT has also increased its annualized dividends over this time frame as well.

Currently, Realty Income has a nearly 5% forward dividend yield. Moreover, the REIT has steadily increased its payouts over the past few decades. Its most recent dividend increase was 11.9% . While not certain, this could mean that Realty Income continues to increase its payouts by a larger percentage than before, as its expansion into high-growth areas like gaming properties starts to pay off.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Realty Income. The Motley Fool has a disclosure policy.