During the current inflationary climate, prices are soaring and buying power is diminishing. Augmenting household incomes to cover regular costs may soon become obligatory if current monthly costs outstrip wages. While real estate is an excellent investment platform for generating passive income through monthly rent, a high admission price, lack of diversification,  lack of easy liquidity and contingent liabilities due to ownership targeted nuisance lawsuits can make it too high a risk factor for many investors to tolerate. 

Dividend stocks offer an investment platform that addresses all of the risk concerns posed by real estate: a relatively low cost, wide diversification potential, liquidity, and no direct ownership liabilities that can make a shareholder a lawsuit target. 

24/7 Wall Street has amassed  a sizable database of dividend paying stocks.  We have published a panoply of articles over the past few years on the topic, and presented dozens of choices for readers to research for their own interests. The following selections in this group can generate monthly passive income of $1,000 for a $20,000 investment per stock, based on market prices at the time of this writing. 

Dynex Capital, Inc.

Stock #1  : Dynex Capital, Inc. (NYSE: DX)

Yield: 12.91%

Shares for $20,000: 1,655

Monthly Dividend Income:~$215.17

For those who want the benefits of dividend stocks as well as a foot in the real estate monthly income realm, but are hesitant because of the aforementioned drawbacks, the Real Estate Investment Trust (REIT) offers the best of both worlds. For tax purposes, registered REITs are required to remit 90% of profits to shareholders. 

While receiving the prorated portion of monthly property mortgage payment profits is a certainly welcome form of passive income, many REITs are involved with originating mortgages and managing properties, which are activities whose overhead costs can eat into those profits. 

Such is not the case with Dynex Capital Inc, which is based in Glen Allen, VA. It further removes itself from legal liabilities by being a third party investor in mortgage backed securities (MBS), both government sponsored (ex: Fannie Mae) and non-sponsored. Additionally, Dynex uses US Treasury futures to hedge the portfolio against interest rate fluctuations that can impact the floating rate mortgage securities it is holding.

PIMCO Income Strategy Fund II

Stock #2 : PIMCO Income Strategy Fund II (NYSE: PFN)

Yield: 11.64%

Shares for $20,000: 2,691

Monthly Dividend Income:~$194.00

From a dividend earnings perspective, the general rule of thumb is that the safer the bond from financially defaulting, the higher its rating from Moody’s or S&P, and thus, the lower its yield. A majority of funds that are delivering returns in the double digit “high-yield” zone that are invested in fixed-income, often get them from “high-yield” or “junk” bonds that are rated below investment grade. The PIMCO Income Strategy Fund II surprisingly avoids this tradeoff, and keeps a majority of its portfolio in the investment grade vicinity while still earning yields north of 11% for its shareholders.

Pacific Investment Management Company is headquartered in Newport Beach, CA, is owned by insurance behemoth Allianz and it manages over three hundred branded PIMCO mutual funds, ETFs, and other investment vehicles. The PIMCO Income Strategy Fund II has $787 million AUM, and as of April 2024, was invested 92.52% in bonds, 4.97% in stocks. The allocation breakdown was 39.23% government, 20.46% corporate, with 27.57% in cash or equivalents, and less than 6.5% each of securitized, municipal and derivative holdings.  

BlackRock ESG Capital Allocation Term Trust

Stock #3 : BlackRock ESG Capital Allocation Term Trust (NYSE: ECAT)

Yield: 10.81%

Shares for $20,000: 1,201

Monthly Dividend Income:~$180.16

The advocacy towards ESG (Environmental, Social Governance) concerns in corporate business practices has recently fallen into disfavor, as asset managers started realizing last year that ESG demands often have no standards or limits and a great many are simply impractical in practice. Even asset management goliath BlackRock realized this last year as it rejected 93% of shareholder ESG proposals last year due to their “low-quality” and intrinsic negative fiduciary impact. 

Nevertheless, this doesn’t mean that BlackRock has abandoned ESG qualified investing entirely. The BlackRock ESG Capital Allocation Term Trust is a balanced, closed-end mutual fund that includes ESG parameters in its equation when evaluating stocks or bonds to add to its $1.8 billion AUM sized portfolio, but it doesn’t prioritize ESG concerns over more fundamental ones, like ROI.

As a term trust scheduled to dissolve in 2033, the BlackRock ESG Capital Allocation Term Trust portfolio, as of the beginning of May 2024, holds 68.51% equities and 27.8% fixed income. However, its managers are not averse to using option strategies to enhance returns. In fact, its largest position at the time of this writing is in NASDAQ 100 E-mini Jun 24 futures contracts (5.07% of portfolio). The next two are Microsoft Corp. (NASDAQ: MSFT) – 3.30%, and Nvidia (NASDAQ: NVDA) – 2.37%.  

Thornburg Income Builder Opportunities Trust

Stock #4 : Thornburg Income Builder Opportunities Trust (Nasdaq: TBLD)

Yield: 8.82%

Shares for $20,000: 1,273

Monthly Dividend Income:~$147.00

Based in Santa Fe, NM, Garrett Thornburg founded his firm in 1982 with an initial focus on corporate and municipal bonds. It has since grown and expanded to encompass multiple funds, trusts and both institutional and private client wealth management platforms. 

The Thornburg Income Builder Opportunities Trust is a closed-end balanced global fund with $584 million AUM. As of April, 2024, its portfolio stood at 61% equity (44.22% non-US) and 30.63% in fixed income with the balance in cash. 

The three largest portfolio positions were: Roche Holding AG (OTC: RHHBY) – 3.02%; Enel SpA (OTC: ENLAY) – 2.71%; and Orange SA (NYSE: ORAN) – 2.55% – all non-US companies. The fourth largest position is the first US one in its top 10; AT & T Inc. (NYSE: T) – 2.53%.

ClearBridge MLP and Midstream Total Return Fund Inc.

Stock #5 : ClearBridge MLP and Midstream Total Return Fund Inc. (NYSE: CTR)

Yield: 8.76%

Shares for $20,000: 480

Monthly Dividend Income:~$146,00

Master Limited Partnerships in midstream operations derive their income streams from the storage and transportation of oil and associated refined products. Transportation can be via tanker, pipeline, or inland trucking. The ClearBridge MLP and Midstream Total Return Fund Inc. is an open end, mutual fund of funds managed by Legg Mason out of New York. It invests in shares of public energy companies, primarily LPs and MLPs. 

With $418 million AUM, the ClearBridge MLP and Midstream Total Return Fund Inc. portfolio was unsurprisingly invested 95,77% in the energy sector and 4.23% in utilities, as of April, 2024.

Nuveen Preferred and Income Term Fund

Stock #6 : Nuveen Preferred and Income Term Fund (NYSE: JPI)

Yield: 7.07%

Shares for $20,000: 1,063

Monthly Dividend Income:~$117.83

Chicago headquartered Nuveen is an asset management company with about 50 closed end  funds and other vehicles for investors of all types. The Nuveen Preferred and Income Term Fund invests in preferred stocks and fixed income securities issued primarily by financial sector companies. It uses the Bank of America/Merrill Lynch Preferred Stock Fixed Rate Index as its benchmark.

Preferred stocks are usually set at a $25 par value, and pay a dividend coupon comparable to medium maturity bonds between 7 to 14 years. As of April 2024, Nuveen Preferred and Income Fund’s largest positions were in preferred stocks issued from Land O’Lakes, JP Morgan Chase, and Assured Guaranty Ltd. 

Interested parties should note: as a term fund, Nuveen has scheduled the Preferred and Income Term Fund to dissolve in August, 2024. However, a proxy vote is currently in process to allow shareholders to elect to continue their investments in the fund. According to Nuveen’s press release: 

“If the fund’s common assets taking into account common shares properly tendered in the tender offer would be $70 million or greater, the tender offer will be completed and the fund’s term will be eliminated. If the fund’s common assets after the tender offer would be less than $70 million, the tender offer will be cancelled with no common shares repurchased, and instead, the fund will proceed to terminate as scheduled.

If JPI’s term structure is eliminated, the fund’s name will change to “Nuveen Preferred Securities & Income Opportunities Fund,” and the common shares of the fund will continue to trade on the New York Stock Exchange under the current ticker symbol. In addition, if the fund’s term structure is eliminated, Nuveen will waive 50% of its net management fees over the first year following the elimination of the term, which may enhance the net earnings of the fund.”

Name:	Yield:	Monthly Dividend Amount:
Dynex Capital, Inc. (NYSE: DX)	12.91%	$215.17
PIMCO Income Strategy Fund II (NYSE: PFN)	11.64%	$194.00
BlackRock ESG Capital Allocation Term Trust (NYSE: ECAT)	10.81%	$180.16
Thornburg Income Builder Opportunities Trust (Nasdaq: TBLD)	8.82%	$147.00
ClearBridge MLP and Midstream Total Return Fund Inc. (NYSE: CTR)	8.76%	$146.00
Nuveen Preferred and Income Term Fund (NYSE: JPI)	7.07%	$117.83
Total:		$1,000.16

 

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