Is 12% Too Good to Be True? Not for These Monthly Dividend Payers

With the 10-year US Treasury Bond yield hovering in the 4.30% to 4.50% range at the time of this writing, bond yields are tempting income investors again, especially those who are seeking annual yields north of 5.0%. While a 6.5% yield on a corporate bond with an “A” rating might seem like an attractive deal to an income-focused investor, that same person would probably turn down their nose at a REIT or BDC stock yielding double that amount. They would probably faint in incredulity that there’s a good chance the REIT represents the corporate bond issuer’s office space landlord and the BDC represents their M&A financing source.

High yielding dividend stocks with consistent dividends that pay monthly may sound too good to be true, but savvy income investors have been happy campers for years, and keep close attention to any new opportunities in this niche sector. The following are ten (10) examples of extraordinarily high yielding dividend stocks that deliver a monthly payout. For the sake of comparison, a $10,000 investment example is being included, so the monthly breakdown can also be realized. All quotes are based on market price at the time of this writing.

Orchid Island Capital

Stock #1 : Orchid Island Capital (NYSE: ORC)

Yield: 20.51%

Shares for $10,000: 1,408.45

Annual dividend: $2,051 .00

Monthly dividend: $170.92        

In order to go public in the US capital markets, Real Estate Investment Trusts (REIT) are required to fork over 90% of their profits. That said, the REIT sector has several aspects and specialties – and not all of them involve direct, bricks and mortar real estate to classify as a REIT, such as the popular Realty Income Corp. (NYSE: O), which is best known for its huge 15,000 triple net lease commercial properties portfolio.

Headquartered in Vero Beach, FL, Orchid Island Capital, Inc. is a REIT that specializes in investments of Residential Mortgage Backed Securities (RMBS). Within its $6.74 billion AUM portfolio, there are single resident mortgages, collateralized mortgage obligations (CMO), mortgage pass-through certificates, as well as interest-only, principal-only, and other types of securities and mortgage related paper. Orchid Island Capital focuses solely on real estate paper; it has zero involvement with physical properties, so it operates more like a sophisticated portfolio manager than a conventional REIT. However the profit remittance requirement to shareholders makes for a hefty 20.51% yield. 

The top three (3) institutional shareholders in Orchid Island Capital stock as of June are: BlackRock Inc. (6.51% of outstanding shares); Vanguard Group (4.89%); and Mirae Asset Global ETFs Holdings Ltd. (3.28%).  

Oxford Square Capital Corp.

Stock #2: Oxford Square Capital Corp. (NASDAQ: OXSQ)

Yield: 18.18%

Shares for $10,000: 23,100

Annual Dividend: $1,818.00

Monthly Dividend: $151.50

Similarly to REITs, Business Development Companies (BDCs) are also required to remit 90% of profits to their shareholders. Although they existed previously, the BDC sector rapidly grew to fill the void left by the large banks following the 2008 subprime bank meltdown. The consolidation and mergers of many long-standing entities rendered small to medium-large corporate client financing needs too small of a business to retain. BDC financings are usually first lien, short term, industry agnostic, and higher interest than what banks may have charged in the past, so BDC margins are generally high. 

Based in Greenwich, CT, Oxford Square Capital Corp. has both BDC and investment management facets, with a particular affinity for debt and/or equities for companies in the tech sector. In particular, Oxford Square has interest in, but not limited to:

• Computer software, Infotech 
• Media and Telecommunications 
• Semiconductors 
• Technology-enabled services
• Healthcare technology

Top 3 institutional holders are: Two Sigma Advisors, LP: (2.00% of outstanding shares); Two Sigma Investments, LP( 1.21%); Legal & General Group, PLC (0.63%).

Horizon Technology Finance Corporation

Stock #3: Horizon Technology Finance Corp. (NASDAQ: HRZN)

Yield: 17.39%

Shares for $10,000: 1,326.26

Annual Dividend: $1,739.00

Monthly Dividend: $144.91

Within the BDC space, the corporate finance needs of many companies at varying stages of development can differ widely. Tilting towards a preference to the technology, biotech, healthcare, cleantech, and sustainability sectors, Farmington, CT headquartered Horizon Technology Finance Corp. provides venture and secured debt financing structures to qualifying growth-stage companies. Since 2004, Horizon Technology Finance Corp. has supplied $3.5 billion in venture loans to over 340 different companies. 

The top 3 institutional shareholders are: Green Alpha Advisors LLC: (0.89% of outstanding shares); Truemark Investments LLC (.,68%); Legal & General Group, PLC (0.66%).

ARMOUR Residential REIT, Inc.

Stock #4 : Armour Residential REIT, Inc. (NYSE: ARR)

Yield: 17.13%

Shares for $10,000: 591.71

Annual Dividend: $1,713.00

Monthly Dividend: $142.75

The federal government backed mortgage securities industry is certainly in healthy shape. Founded in 2008, Maryland headquartered Armour Residential REIT, Inc. has paid out $2.4 billion in dividends since its inception. ARR is a real estate investment trust that manages a portfolio of US agency backed mortgage securities from Freddie Mac, Fannie Mae, and Ginny Mae. Its $13.55 billion AUM war chest also will hold US Treasuries at any given time. 

The company’s top 3 institutional shareholders are: Blackrock (13.61% of outstanding shares); Vanguard (9.77%); State Street Corp. (2.87%). 

Ellington Credit Company

Stock # 5:  Ellington Credit Company (NYSE: EARN)

Yield: 16.75%

Shares for $10,000: 1,733.10

Annual dividend: $1,675.00

Monthly dividend: $139.58

Ellington Credit Company, is a registered real estate investment trust located in Old Greenwich, CT. Founded in 2012, the bulk of Ellington Credit Company’s activities are in managing its portfolio of mortgage backed securities (MBS), which are a mix of US federal government agency issues from entities such as Fannie Mae or Freddie Mac, and private mortgage backed securities, which may include some subprime loans. Since switching from quarterly to monthly dividends in 2021, EARN has made its dividend payouts like clockwork. As of the end of March, EARN had $14.7 billion AUM. 

The three largest institutional shareholders are: Wells Fargo (4.37% of outstanding shares); Millennium Management LLC (2.48%); Susquehanna International Group, LLP (1.50%).  

Dynex Capital, Inc.

Stock #6: Dynex Capital, Inc. (NYSE: DX)

Yield: 16.57%

Shares for $10,000: 806.45

Annual dividend: $ 1,657.00

Monthly dividend: $138.08

Founded in 1987 in Glen Allen, VA, Dynex Capital, Inc. is a REIT that invests in a mix of GSE mortgage-backed securities, such as FDMC, as well as non agency ones. With its $11.1 billion mortgage portfolio, Dynex Capital focuses almost exclusively on the residential housing market, and tweaks its strategy and portfolio holdings to adjust to any opportunities or setbacks. 

The three top institutional shareholders are: Blackrock (7.88% of outstanding shares); Vanguard (4.33%); Millennium Management LLC (3.06%). 

Prospect Capital Corporation

Stock #7: Prospect Capital Corporation (NASDAQ: PSEC)

Yield: 16.07%

Shares for $10,000: 2,967.35

Annual Dividend: $1,607.00

Monthly Dividend: $133.91

Located merely yards away from Grand Central Station in New York City, Prospect Capital Corporation is a BDC focused on the private corporate credit arena. Their financings originate  secured debt, senior debt, mezzanine debt, first lien debt and other types of loan structures for later stage and emerging growth companies. Some examples of use of proceeds can include leveraged buyouts, refinancing, recapitalizations, acquisitions, turnarounds, bridge loans, and other corporate needs.

Prospect Capital’s deal criteria range is between $10 million and $500 million per transaction for a solo investment. Prospect Capital will also entertain larger deals via syndication and/or on an agency basis. Qualifying prospect companies must have EBITDA between $5 million and $150 million, enterprise value between $5 million and $1 billion, and sales value between $25 million and $500 million. 

As an attestation to its dividend consistency and reliability, Prospect Capital Corporation has unfailingly paid its monthly dividend for 94 consecutive months to date. 

AGNC Investment Corp.

Stock #8 : AGNC Investment Corp. (NASDAQ: AGNC)

Yield: 15.45%

Shares for $10,000: 1,063.83

Annual dividend: $1,545.00

Monthly dividend: $ 128.75  

Based in Bethesda, MD, AGNC Investment Corp. invests almost exclusively in US Government Agency mortgage securities, such as Fannie Mae, Freddie Mac and Ginny Mae. However, it uses leverage via repurchase agreements and aggressively incorporates hedging strategies and derivatives to both protect portfolio assets as well as to enhance returns.  With a $78.9 billion portfolio size, AGNC is one of the larger US REITS in operation. 

The three largest institutional investors in AGNC are: Vanguard (8.41% of outstanding shares); Blackrock (4.81%); Geode Capital Management LLC (2.21%). 

PennantPark Investment Corporation

Stock #9: PennantPark Investment Corporation (NYSE: PNNT)

Yield:  13.95%

Shares for $10,000: 1,455.60

Annual Amount: $1,395.00

Monthly Amount: $116.25

While BDCs predominantly engage in private debt, private equity firms invest for significant ownership stakes. PennantPark is a Miami headquartered Business Development Company (BDC) with an equities appetite that has it operate often as a private equity company, rather than, ironically, a public company. Pennant Park’s total portfolio is $1.328 billion, containing 152 companies across 34 different industries. The average PNNT investment sized deal is $8.1 million. The company engages in direct senior secured loans, mezzanine debt, and equity investments. These financings can manifest in an array of configurations: preferred stock, warrants, options, senior secured debt, mezzanine loans, and other types of debt securities, as well as direct, non-controlling equity investments. The company even advertises that its due diligence process is very much borrowed from the private equity industry, including viable exit strategies for its equity financier portions.

The three top institutional investors are: LSV Asset Management (2.82% of outstanding shares); Invesco (2.81%); Two Sigma Advisors LP (2.06%). 

Fortitude Gold Corporation

Stock #10 :  Fortitude Gold Corporation (OTC: FTCO)          

Yield: 13.71%

Shares for $10,000: 3,267.97

Annual dividend: $1,371.00

Monthly dividend: $114.25

With the spot price of gold once again flirting with its $3,500 per oz. alltime high, gold’s allure and value has once again. Central banks are now in their fourth consecutive year of increased gold buying, and expanded diversification away from the US dollar. 

With ownership of five gold mine properties in Nevada, Fortitude Gold Corporation is a gold and silver mining company headquartered out of Colorado Springs, CO. Their flagship project is the Isabella Pearl Mine, which has 601 unpatented claims over 10,400 acres in Nevada. Proven reserves can potentially yield up to 220,000 oz. of gold and 1.3 million oz. of silver. 

These are just a few examples of the kinds of high-yielding dividend stocks that can be added to any portfolio if they suit one’s investment parameters. While the normal prudent monitoring of any stock should also apply here, it’s not a bad idea to keep a list of some alternates to switch to if some situation causes any of the stocks here to change or alter their dividend. For example: 

• A BDC, REIT or other key asset of a public company could be bought out by a private company. 
• If an earthquake or other disaster were to destroy properties or render them uninhabitable, there would likely be a sudden drop in rental income. 
• Any extreme commodity price market fluctuation and source could suddenly boost or drop dividends depending on situations, such as war, shipping policies, tariffs, etc. 

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