Well, she finally did it. Janet Yellen finally hiked the targeted fed funds rate from 0% to a whopping 0.25%. But she also made it abundantly clear that she had no plans to raise it aggressively from here. Although we have officially achieved liftoff, rates will still be very low for a long time to come.
So, if you’re waiting for a 5% CD to help fund your retirement … let’s just say I hope you’re not holding your breath.
The bottom line is that income investors are going to need to look elsewhere in 2016 … and probably for several years to come. And one solid option is in monthly dividend stocks.
The problem with traditional dividend stocks and bonds is that the cash flows are lumpy. Our expenses tend to be monthly, yet bond interest is generally paid twice per year and most dividends are paid quarterly.
But some of the very best dividend stocks are those that pay 12 times a year. While you should never buy a stock purely because of its payout schedule, there is quite a lot to like about monthly dividend stocks. When they commit to paying monthly, management is showing very ostentatiously that they are giving their shareholders what they want.
And for investors reinvesting their dividends, the monthly frequency means faster dividend compounding.
So with no further ado, let’s just into my favorite monthly dividend stocks for 2016.
EPR Properties (EPR)
I’ll start with a quirky stock that is something of a misfit in the REIT space: EPR Properties.
The persistent wailing and gnashing of teeth throughout 2015 over the Fed’s rate hike hit REITs particularly hard, and EPR was no exception. Between late January and September, the stock lost 25% of its value, though it has been steadily gaining ground ever since.
EPR has an odd mixture of properties and focuses mostly on entertainment assets, such as movie theaters, ski parks and gold driving ranges. (“EPR†is short for “Entertainment Properties.â€) It also owns charter schools and child development centers. This makes it hard to compare EPR to peers, because frankly, it really doesn’t have any.
Over the past five years, EPR has grown its dividend at a nearly 7% clip. For a conservative REIT, that’s pretty good, and certainly better than the rate of inflation.
I don’t see a quarter-point Fed hike having much of an impact on EPR from here. Buy it for the monthly dividend and plan to hold on to it for a while.
Next up is Stag Industrial (STAG), a relatively small REIT with a market cap of about $1.3 billion. This makes STAG too small for the big individual investors to buy but still big enough to be properly diversified. There is a major advantage to being a regular, individual investor. We can buy outstanding stocks like STAG without having to worry about moving the market.
