According to the Internal Revenue Service (IRS), passive income generally includes earnings from rental activity or any trade, business, or investment in which the individual does not materially participate. It can also include income from limited partnerships, stocks, bonds, and other similar enterprises in which the investor is not actively involved. The more passive income can help cover rising costs like mortgages, insurance, taxes, and other expenses, the easier it is for investors to put away money for future needs as they prepare for retirement. Dependable recurring dividends, especially monthly dividends, are a recipe for success.
While the recent inflation data is undoubtedly far better than the 9.1% increase printed in the summer of 2022, many Americans still face the reality that prices for everyday necessities like food, energy, and other necessities remain very elevated. Inflation gradually reduces the buying power of consumer dollars. Getting a monthly dividend payment can help battle the ongoing inflation, which is resting at 3% but feels much higher on many items.
We screened our monthly dividend stock database, looking for the five highest-yielding companies. While they are much better suited for those with higher risk tolerance, they all deliver big payments every 30 days.
Why do we cover monthly dividend stocks?
Since 1926, dividends have contributed approximately 32% of the total return for the S&P 500, while capital appreciations have contributed 68%. Therefore, sustainable dividend income and capital appreciation potential are essential for total return expectations.
Orchid Island Capital
This specialty finance company invests in residential mortgage-backed securities on a leveraged basis.
With a stunning 16.42% dividend, this stock will help pay the monthly bills easily. Orchid Island Capital Inc. (NYSE: ORC) is another specialty finance company that invests in residential mortgage-backed securities (RMBS) in the United States.
The company’s RMBS is backed by single-family residential mortgage loans, referred to as agency RMBS. Its portfolio includes traditional pass-through agency RMBS, such as mortgage pass-through certificates and collateralized mortgage obligations, and structured agency RMBS comprising interest-only, inverse interest-only, and principal-only securities.
Orchid Island Capital has elected to be taxed as a real estate investment trust (REIT) for the United States federal income tax purposes.
ARMOUR Residential REIT
This REIT invests in residential mortgage-backed securities in the United States.
With a massive 15.02% dividend yield and years of solid performance, this company is a perfect monthly dividend idea. ARMOUR Residential REIT Inc. (NYSE: ARR) invests in residential mortgage-backed securities (MBS) in the United States.
Its securities portfolio primarily consists of securities issued or guaranteed by the United States Government-sponsored entity (GSE) and the Government National Mortgage Administration backed by fixed-rate, hybrid adjustable-rate, and adjustable-rate home loans, unsecured notes and bonds issued by the GSE and the United States treasuries, and money market instruments.
Oxford Square Capital
This business development company operates as a closed-end, non-diversified management investment company.
This company pays a massive 15% dividend, which could result in a substantial total return home run if the stock moves higher. Oxford Square Capital Corp. (NASDAQ: OXSQ) is a business development company that operates as a closed-end, non-diversified management investment company.
It is a private equity and mezzanine firm that invests in both public and private companies. It invests in secured and unsecured senior debt, subordinated debt, junior subordinated debt, preferred stock, common stock, and syndicated bank loans.
Oxford Square Capital primarily invests in debt and/or equity securities of technology-related companies that operate in:
- Computer software
- Internet
- Information technology infrastructure and services
- Media
- Telecommunications and telecommunications equipment
- Semiconductors
- Hardware, technology-enabled services
- Semiconductor capital equipment
- Medical device technology
- Diversified technology
- Networking systems
Ellington Credit
Ellington Credit acquires, invests in, and manages residential mortgage and real estate-related assets.
This company pays a 14.02% dividend and could have the biggest upside in the group. Ellington Credit Co. (NYSE: EARN) is focused on acquiring, investing in, and managing secondary collateralized loan obligations (CLO) mezzanine debt and equity tranches.
The company’s primary objective is to generate attractive risk-adjusted total returns for its shareholders by making investments in multiple parts of the CLO capital structure, including mezzanine debt and equity tranches.
The company selects investments for their ability to provide a total return to drive a sustainable earnings stream and book value growth over a long-term horizon rather than focusing just on current yield.
Ellington Credit also takes a trading-oriented approach, seeking to take advantage of pricing inefficiencies in the CLO market rather than simply buy-and-hold.
AGNC Investment
AGNC Investment provides private capital to the housing market in the United States.
This company has paid solid monthly dividends for years; its current yield is 13.81%. AGNC Investment Corp. (NASDAQ: AGNC | AGNC Price Prediction) is a REIT in the United States. The company provides private capital to the United States housing market, enhancing liquidity in the residential real estate mortgage markets and, in turn, facilitating home ownership in the United States.
The company invests primarily in agency RMBS on a leveraged basis.
These investments consist of residential mortgage pass-through securities and collateralized mortgage obligations for which the principal and interest payments are guaranteed by a U.S. government-sponsored enterprise, such as:
- The Federal National Mortgage Association
- The Federal Home Loan Mortgage Corporation
- U.S. government agencies, such as the Government National Mortgage Association
It may also invest in other assets related to the housing, mortgage, or real estate markets
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