1 Stock That Will Pay You Monthly

When Charlie Munger was a boy, he described an encounter he had with an older man who seemed to work very little but had a lot of money. Curious what the man did he questioned the line of business he was in and discovered to his surprise he “rendered dead horses.” What Charlie learned from the conversation was less about horses and more about how one man got rich because he was the only player in that market.

That observation led Charlie to find companies that have dominant market shares because they could command premium prices. But it wasn’t the only characteristic he found attractive in a company. Another was its ability to pay shareholders a dividend yield based on cash flows earned. Only a company that had stable and predictable cash flows could confidently start paying an annual yield so it spoke to the robustness of the business model.

These days, most companies that fall into that category pay out quarterly dividends, but every once in a while you will stumble on one that pays out monthly, such as Realty Income.

Key Points

• Realty Income has a strong history of paying dividends and is featured in the S&P 500 Dividend Aristocrats index.
• By paying a monthly dividend, income seekers have a way to earn money each month to pay ongoing expenses.  
• On a valuation basis, analysts forecast Realty Income has upside to $62 per share also.

The Power of Compounding Dividends

The hard thing about dividend investing is often the extreme boredom that comes from holding stock. When Buffett first snapped up shares of Coca Cola the yield was not much different than it is today, but as time went by, and the Board of Directors slowly but surely increased the annual payout, the yield Buffett earned on his original principal grew, and grew, and grew. Today that annual yield is closer to 50% on his originally invested capital.

It highlights how compounding over time has such a disproportionate effect on returns. While Berkshire Hathaway makes billions on its investment in Coca Cola, an investor who bought just $100,000 when he did would also be earning $50,000 annually from that bet alone. It goes to show how much the patient investor can make when they buying the right stocks that have the potential to hike payouts consistently over time.

So, does Realty Income fall into that category?

Is Realty Income Worth Buying?

Realty Income pays out 5.28% annually to shareholders and has a 27 year growth streak of payouts. That’s the kind of track record that should whet the appetite of any income seeker.

But as time goes by and expenses hit monthly, earning a monthly dividend seems even more attractive, and yet few companies offer such a plan. However, Realty Income bucks the trend and is so famous for its stipend that it literally has a registered trademark called The Monthly Dividend Company.

To add further confidence to shareholders, it’s also part of the S&P 500 Dividend Aristocrats index, enjoys high gross profit margins, has sufficient liquid assets to meet its liability obligations, and is forecast to be profitable this year again.

Analysts also peg fair value about 10% higher at $62 per share. So whether it’s income or value, Realty Income checks the boxes and best of all, it pays monthly to help investors receive a regular stipend to pay monthly expenses.