Investing

2 Ultra High-Yield Dividend Stocks That Can Pay Your Rent Every Month

Rich Duprey

Published: August 22, 2024 12:17 pm

The New York City mayoral race of 2010 will be forever remembered because of candidate Jimmy McMillan’s campaign slogan “the rent is too damn high!” 

It’s a phrase that resonates even more today because rental costs are far higher today than they were 14 years ago. According to Zillow average monthly rents are over $2,100. A Harvard University study earlier this year found that half of Americans pay over 30% of their income on rent, on average. Coupled with inflation over the last four years and cracking that monthly nut is increasingly difficult. 

That’s why investors should explore monthly dividend stocks. These income-generating stocks offer a steady stream of revenue every month. By constructing your portfolio to include a selection of high-yield dividend stocks, especially ones that routinely raise their payout, you could have a regular revenue stream that offsets some or all of your monthly rental payment.

Wellington Management found that high-yield dividend stocks outperformed all other classes between 1930 and 2022. That suggests the two stocks below may be among the best ones to buy today.

Key Points About This Article:

• National average rents go for around $2,100 a month, making income-generating stocks a good revenue supplement.
• High-yield dividend stocks have a proven track record of beating other dividend stocks for nearly 100 years.
• Sit back and let dividends do the heavy lifting for a simple, steady path to serious wealth creation over time. Grab a free copy of “2 Legendary High-Yield Dividend Stocks” now.

Realty Income (O)

The granddaddy of monthly dividend payments is Realty Income (NYSE:O). This real estate investment pioneered the concept, and since being founded in 1969, it has declared 650 consecutive monthly dividend payments. It even bills itself as “The Monthly Dividend Company.”

Moreover, it regularly raises the payout every quarter and has increased the payout for 30 straight years making it a Dividend Aristocrat. Over the last decade, Realty Income has grown its dividend at a 15% compounded annual growth rate.

Of course, like all REITs, Realty Income is required to pay out almost all of its profits as dividends. It is able to afford this steady stream of dividend hikes by typically investing in single-tenant commercial real estate. It also does so on a triple net-lease basis, meaning the tenant, not Realty Income, is responsible for the rent, insurance, maintenance and taxes on the property. Recently the REIT began investing in data centers to capitalize on this high-growth vertical.

Among the sectors Realty Income services, grocery stores, convenience stores, and dollar stores represent more than a quarter of the portfolio. Walmart (NYSE:WMT), 7-Eleven, and Dollar General (NYSE:DG) are some of its largest tenants.

Modiv Industrial (MDV)

The second monthly dividend stock to consider is Modiv Industrial (NYSE:MDV). Like Realty Income, the REIT focuses on single-tenant properties, but as its name suggests, they are in the industrial manufacturing market. Its largest tenant is Lindsay (NYSE:LNN), a maker of farm and heavy equipment machinery. It represents almost 15% of the portfolio.

Earlier this year Modiv was not being acquisitive. It didn’t believe the market was right for buying more real estate. It said, “We take the Buffett-esque view that, at this stage of the market cycle, we can afford to stand over the plate looking for the fat pitch without fear of strikes being called.”

In April, though, it purchased the real estate from the maker of optical systems for the defense and aerospace industries. It was a small purchase, just $5.8 million, but is immediately accretive. Management says “we always want to make sure each dollar of capital deployed is working hard as it can to create value.” It also notes it hasn’t found a single additional property worth investing in.

While waiting for the next fat pitch to cross the plate, investors can revel in the dividend, which yields 7.8% annually.