If You Buy ONE Monthly Dividend Stock, Make it THIS One

Summary

In this video, the host discusses top monthly dividend stocks, highlighting those with impressive returns and yields. Key stocks like Gladstone Investment Corporation, Prospect Capital, and Horizon Technology Finance are analyzed for their dividend yields, total returns, and risks. The host emphasizes a strategy that balances dividend income and price appreciation, while advising caution with highly volatile stocks. For those seeking high cash flow, the video offers tips on tax-efficient strategies and portfolio diversification, providing a complete list of monthly dividend payers and their performance to help investors maximize returns.

Takeaways

• 😀 Gladstone Investment Corporation (GIC) has produced a 110% total return over 5 years and a 133% cash yield for investors, making it one of the top monthly dividend stocks despite having a 6.9% dividend yield.
• 😀 Gladstone's higher equity positions in midsize businesses bring greater returns but come with higher risk, unlike most other business development companies (BDCs) that focus on debt investments.
• 😀 Prospect Capital (PSEC) offers a high 12.9% dividend yield but has only seen an 11% decline in share price over the past 5 years, leading to a 50% total return.
• 😀 Horizon Technology Finance (HRZN) has a solid 11.4% dividend yield but is heavily focused on venture capital, which has suffered recently due to economic downturns, resulting in a 62% total return.
• 😀 Pennant Park Floating Rate Capital (PFLT) offers an 11% yield with a unique advantage in floating rate loans, providing more stability in downturns, and has a 66% total return over 5 years.
• 😀 Monthly dividend stocks offer high cash flow but can come with price volatility, especially if they pass through most of their earnings to avoid income taxes, limiting growth potential.
• 😀 Monthly dividend stocks are often taxed as ordinary income, meaning investors may face higher taxes on their dividends compared to long-term capital gains tax rates.
• 😀 Investors should consider their goals—whether seeking immediate cash flow or long-term growth—when choosing between high-yield monthly dividend stocks and those with balanced returns.
• 😀 Diversification is crucial when investing in monthly dividend stocks, especially to balance between yield and price return, as some stocks may have lower price returns but higher yields.
• 😀 The video includes a list of 20 monthly dividend stocks, with a focus on those yielding at least 6% and excluding those on the OTC markets or pink sheets, which often carry higher risks.

Q & A

What is the key highlight of the top monthly dividend stock mentioned in the video?

The top monthly dividend stock mentioned in the video has delivered a 110% total return and a 133% cash yield to investors over the past 5 years, combining both high dividend yield and impressive price appreciation.

Why does the speaker emphasize not putting all money into one stock?

The speaker emphasizes diversification because investing all your money in a single stock can be risky. By diversifying, you can balance risk and improve the overall stability of your portfolio.

What makes Gladstone Investment Corporation (G) a unique monthly dividend stock?

Gladstone Investment Corporation is a Business Development Corporation (BDC) that focuses on a higher equity investment in businesses, leading to higher risk but also higher returns. Its 108% total return over the last 5 years and its 6.9% dividend yield set it apart from other monthly dividend stocks.

What are the potential risks of investing in BDCs like Gladstone?

The main risks of investing in BDCs like Gladstone include the higher equity positions they take in businesses, which increases both risk and volatility. While this can lead to higher returns, it can also result in larger price fluctuations, especially during market downturns.

Why does Prospect Capital (PSE) rank lower on the list despite its high dividend yield?

Prospect Capital ranks lower because, despite its high dividend yield of 12.9%, its share price has decreased by 11% over the past 5 years, resulting in a lower overall total return compared to other stocks on the list.

What are some advantages of investing in Horizon Technology Finance (HRZN)?

Horizon Technology Finance specializes in secured loans to venture-backed companies in the Life Sciences and Technology sectors, providing a high 16.8% average yield on portfolio debt. This has allowed the company to grow its dividend by 10% over the last 5 years, though its share price has remained flat during that period.

What is the unique feature of Pennant Park Floating Rate Capital (PFLT)?

Pennant Park Floating Rate Capital specializes in floating-rate loans, offering 86% of its portfolio in secured debt, which provides protection during economic downturns. This structure has helped it achieve a 66% total return over the past 5 years, despite a relatively modest share price performance.

What are the pros and cons of monthly dividend stocks mentioned in the video?

The pros of monthly dividend stocks include high cash flow, tax efficiency (since most BDCs pass through all their income to shareholders), and a consistent dividend stream. However, the cons include high volatility, price depreciation, potential tax disadvantages (since most pay non-qualified dividends), and risks tied to interest rates and business performance.

How can investors mitigate the risks of monthly dividend stocks?

Investors can mitigate risks by balancing their portfolio between high dividend yields and price returns. For those focused on cash flow, higher-yield stocks might be more appropriate, while those aiming for long-term growth should look for stocks with both solid dividends and price appreciation. Additionally, investing in tax-advantaged retirement accounts can help minimize tax impact.

Why is Stellis Capital Investment (SEM) considered a safer monthly dividend stock?

Stellis Capital Investment is considered safer because 97% of its loans are in first lien or senior secured debt, meaning the company is paid first in case of defaults. Additionally, its 98% floating rate portfolio provides a hedge against rising interest rates, making it a relatively stable choice for dividend income despite low price return.