While fundamentally discounted ideas tend to generate plenty of attention, the holy grail in the equities sector could be value stocks that pay monthly dividends. Here, you get exposure to businesses that could see their valuation appreciate. And while you’re waiting for that to develop, you can collect passive income 12 times out of the year.
Largely, value stocks that pay monthly dividends benefit from the convenience angle. Most companies pay dividends on a quarterly basis. However, our bills typically come in every month. Therefore, to really enjoy passive income from the capital markets, a monthly-paying investment would be ideal.
Of course, the greater the rewards, the higher the risk. With value stocks that pay monthly dividends, these enterprises stand on shaky ground due to present economic factors. However, if that doesn’t bother you, these ideas might fit the bill.
| BRMK | Broadmark Realty | $4.36 |
| FTCO | Fortitude Gold | $6.98 |
| O | Realty Income | $59.68 |
| EPR | EPR Properties | $34.67 |
| APLE | Apple Hospitality REIT | $14.09 |
| ADC | Agree Realty | $65.38 |
| EFC | Ellington Financial | $11.16 |
Broadmark Realty Capital (BRMK)
Headquartered in Seattle, Washington, Broadmarket Realty Capital (NYSE:BRMK) is a real estate finance company that invests in opportunities throughout the small to middle markets. It’s one of the smaller enterprises, carrying a market capitalization of $581 million. Since the start of the year, BRMK gained nearly 21% of its equity value. However, in the past 365 days, it dropped almost 48% in equity value.
Financially, Broadmark benefits from a decently stable balance sheet. For instance, its cash-to-debt ratio is 0.52 times, outpacing 86.54% of publicly traded real estate investment trusts (REITs). Also, its Altman Z-Score is 3.35, indicating a low risk of bankruptcy. Significantly, the market prices BRMK at a book value of 0.63 times. In contrast, the sector median is 0.79 times.
Regarding passive income, Broadmark carries a forward yield of 9.52%. As well, its payout ratio pings at 65.63%, which isn’t horrific for value stocks that pay monthly dividends. For those that don’t mind accepting some risk, BRMK could rank among the better ideas in this category.
Fortitude Gold (FTCO)
Based in Colorado Springs, Colorado, Fortitude Gold (OTCMKTS:FTCO) is a gold producer targeting projects with low operating costs, strong returns on capital, and high margins. Generally, precious metal firms present considerable dangers. However, contrarians may want to put FTCO on their radar of value stocks that pay monthly dividends. Fundamentally, gold has jumped higher based on the fear trade.
In terms of receiving a market deal, the market prices FTCO at 5.68 times the operating cash flow. As a discount to the metric, Fortitude ranks better than 62.16% of the competition. Also, the company features an enterprise value to EBITDA ratio of 3.75. In contrast, the sector median is 7.49 times.
Notably, Fortitude features an Altman Z-Score of 8, reflecting high fiscal stability and low bankruptcy risk. Also, it’s incredibly profitable with a net margin of 19.74%. For passive income, Fortitude features a dividend yield of 7.02%. Its payout ratio is a bit high at 77.1%, though not exceedingly awful for companies in this category.
Realty Income (O)
Headquartered in San Diego, California, Realty Income (NYSE:O) is a REIT that invests in free-standing, single-tenant commercial properties in the U.S., Spain, and the U.K. Currently, the company commands a market cap of slightly over $39 billion. So far this year, O shares slipped nearly 7%. In the trailing year, it’s down more than 11% as financial woes hit the consumer economy.
Still, for daring contrarians, it could be an interesting pickup for value stocks that pay monthly dividends. Specifically, the market prices O at 1.14 times discounted cash flow (DCF). In contrast, the sector median stands at 1.36 times. Therefore, Realty Income ranks better than 60.61% for this metric (compared to other REITs). Operationally, the company benefits from a three-year revenue growth rate of 5.1%, outpacing 69.5% of its peers. Also, its gross margin comes in at a whopping 93.23%.
For passive income, Realty’s forward yield pings at 5.15%. Its payout ratio presently stands at 214.16%. However, it does enjoy 30 years of consecutive dividend increases, a status it won’t give up on easily.
EPR Properties (EPR)
Based in Kansas City, Missouri, EPR Properties (NYSE:EPR) is a REIT that focuses on entertainment-related properties. These include amusement parks, movie theaters, and ski resorts, among other categories. Thanks to the fading Covid-19 crisis, EPR gained relevancy from a narrative perspective. However, this year has been a tough one, with shares dipping 6%. As well, in the past 365 days, they slipped 34%.
Thus, to be completely transparent, EPR represents a higher-risk name among value stocks that pay monthly dividends. That said, it does bring in value. For instance, the market prices EPR at a trailing sales multiple of 3.95. In contrast, the sector median pings at 6.75. Per Gurufocus, EPR provides better value than 69.49% of REITs. In addition, EPR trades at 0.48 times the projected free cash flow (FCF). Here, the company ranks better than 68% of the competition.
Turning to passive income, the REIT offers a forward yield of 9.53%. However, prospective investors should realize that its payout ratio is elevated at 131.27%.
Apple Hospitality REIT (APLE)
Calling Richmond, Virginia home, Apple Hospitality REIT (NYSE:APLE) owns one of the largest and most diverse portfolios of upscale, rooms-focused hotels in the U.S. Per its website, the company’s portfolio consists of 220 hotels with approximately 29,000 guest rooms located in 87 markets throughout 37 states. While the revenge travel phenomenon fundamentally bolsters Apple Hospitality, its market performance has been left wanting.
Since the start of the new year, APLE slipped by 9%. Still, contrarian investors of value stocks that pay monthly dividends may want to throw some gambling funds at it. Specifically, the market prices APLE at a trailing sales multiple of 2.67. As a discount to revenue, Apple Hospitality ranks better than 83% of the competition. It’s also worth pointing out that APLE trades at 10.81 times FCF. Here, the underlying enterprise ranks better than 61.49% of its rivals.
For passive income, Apple commands a forward yield of 6.79%. However, interested buyers should note that its payout ratio stands at 106.08%.
Agree Realty (ADC)
Headquartered in Farmington Hills, Michigan, Agree Realty (NYSE:ADC) bills itself as a leader in the acquisition and development of properties net leased to the foremost retailers in the U.S. While such a business profile delivers relevance, it’s also risky under present circumstances. For example, since the January opener, ADC gave up 8% of its equity value. Still, in the trailing year, it’s up a bit over 1%.
If you want to venture into adventurous value stocks that pay monthly dividends, ADC could be up your alley. Currently, the market prices ADC at 1.01 times discounted cash flow (DCF). In contrast, the sector median stat comes in at 1.36 times. Therefore, Agree ranks better than 68.18% of the competition for this metric. Operationally as well, the REIT delivers some intriguing figures. Its three-year revenue growth rate stands at 6.1%. During the same period, its FCF growth pings at 14.2%. Both stats rank in the upper half among REITs.
Finally, Agree carries a forward yield of 4.43%. However, the payout ratio stands at 161.79%, warranting a cautious approach.
Ellington Financial (EFC)
Hailing from Old Greenwich, Connecticut, Ellington Financial (NYSE:EFC) acquires and manages mortgage-related, consumer-related, and corporate-related financial assets. I’m just going to borrow the language straight from the company’s website. Primarily, the rising interest rate environment represents a major risk factor for Ellington. Not surprisingly, in the past 365 days, EFC gave up nearly 37% of equity value.
Fundamentally, Ellington in my opinion is only appropriate for speculators. However, if that suits your style, EFC could be one of the viable value stocks that pay monthly dividends. Specifically, the market prices EFC at a forward multiple of 5.78. As a discount to projected earnings, the company ranks better than 91.73% of sector peers. Admittedly, though, that’s where much of the good news ends. Mainly, Ellington suffers from a shaky balance sheet. As well, its three-year revenue growth rate slipped to 35.3% below parity.
Again, if you want to take the risk (for the record, I don’t), Ellington offers a forward yield of 16.06%. However, its payout ratio is 96.71%.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.