Dividend stocks that pay every month aren't common. But they can be valuable assets in an income investor's portfolio as they will bring in cash on a more regular basis, which you can use to save or help pay bills. A couple of stocks that pay high yields and could be good places to invest $5,000 in right now are LTC Properties (NYSE: LTC) and Pembina Pipeline (NYSE: PBA).
1. LTC Properties
A real estate investment trust (REIT) like LTC can provide some great stability for investors. REITs have to pay out 90% of their earnings as dividends. As as long as the business is doing well, investors know that they'll collect a dividend.
LTC's portfolio is focused on healthcare, with half of its properties being senior housing, and the other half being skilled nursing facilities. The company has more than 200 investments that span 29 states, and LTC also works with 32 partners.
The key metric that dividend investors should focus on with REITs is funds from operations (FFO), which is what these businesses often use instead of net income to assess their performance and ability to pay dividends. In its most recent quarter, ended Sept. 30, 2022, LTC reported a diluted FFO per share of $0.60. Extrapolated over a full year, that would be $2.40 -- slightly higher than the $2.28 it pays in dividends over the same time frame.
That's not much of a buffer, but REITs, because they pay out the bulk of their earnings, normally don't have low payout ratios. As long as it is sustainable, that's what is most important. And with a more stable healthcare environment and COVID cases no longer overrunning hospitals and senior housing facilities, there isn't a huge reason to worry about LTC right now.
At 5.9%, the dividend is well above the S&P 500 average yield of 1.7%. And with payments made every month, it can generate some great and consistent recurring income for your portfolio. On a $5,000 investment, you could be collecting approximately $25 each month in dividends.
2. Pembina Pipeline
Oil and gas company Pembina Pipeline is another stock that pays dividends every month. Pembina has been serving customers in the oil and gas industry for more than 65 years. The service provider and pipeline company has been benefiting from high commodity prices and a stronger oil and gas industry over the past year. In 2022, its shares rose 12% as the stock remained resilient amid inflation.
For the period ended Sept. 30, 2022, Calgary-based Pembina reported revenue totaling 2.8 billion Canadian dollars, which was a year-over-year increase of 29%. In addition to raising its guidance given the strong results, the company also boosted its dividend payment by 3.6% last year. It currently yields 5.4%, which is a bit lower than LTC's dividend but still well above average.
In the trailing 12 months, the company's net income of CA$2.7 billion has been nearly one-quarter (23%) of revenue, which has totaled CA$11.5 billion over that time frame. Pembina's payout ratio sits at around 53%, leaving plenty of room for it to make further increases to the dividend, especially with oil and gas companies continuing to do well.
Pembina is a dependable, consistently profitable investment you can hang on to in your portfolio for the long run. It is a good dividend stock to own as it doesn't normally encounter much volatility; over the past five years, the stock has risen a modest 6%.
For investors who want exposure to the oil and gas industry without taking on too much risk, Pembina could be an excellent option.
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David Jagielski has no position in any of the stocks mentioned. The Motley Fool recommends Pembina Pipeline. The Motley Fool has a disclosure policy.
