These 9% yielding stocks pay high monthly dividends; Analysts Say “Buy”

Dividend investing has always been popular, and for good reason. Dividend stocks offer a variety of benefits to yield-seeking investors, but two of the most important are a reliable source of income and a return above inflation. Taken together, these advantages can form the basis of a truly solid portfolio.

Most dividend stocks pay out quarterly, but turning to stocks with a monthly payout schedule allows investors to better plan their income streams to meet their needs. As for the returns, they are still calculated based on the annual dividend rate, so even a small monthly payment multiplied by 12 can result in a high annual return.

But not all dividend stocks are created equal, and some offer better opportunities than others. This is where Wall Street analysts come into play.

By searching the TipRanks database, we found two monthly dividend paying stocks that not only have a market-rate dividend yield of at least 9%, but are also considered “buys” according to analyst consensus. Let’s take a closer look.

Modiv Industrial (MDV)

We’ll start with a real estate investment trust, a REIT, with a few twists. First, Modiv focuses on long-term net lease properties in the industrial and manufacturing sectors. Today, REITs typically generate their income by owning and managing various forms of real estate or by owning, originating and participating in various mortgage loans and related financial instruments. Modiv takes a slightly different approach. The company’s long-term net lease approach allows Modiv to own the land on which a manufacturing facility is located and collect the monthly rents. The tenant receives the security of a long-term rental agreement and assumes responsibility for taxes, insurance, maintenance and other costs. It is a model with benefits for all parties as the owner can sit back and collect rent while the tenant manages the property at their own discretion.

The story goes on

The model worked well for Modiv. The company’s portfolio includes a gross property value of over $614 million and Modiv generates annual base rent of $41.1 million. The weighted average lease term is 14.3 years, providing stability to both parties, and Modiv is able to achieve average annual rent increases of approximately 2.5%. And that brings us to the second “twist” of this REIT, which plays right into its name.

Modiv named itself after “Monthly DIVidends,” its preferred form of returning capital to investors. Since the company collects rent monthly, it makes sense to pay out capital gains on the same schedule. Rent collection represents the company’s primary source of revenue, and in its most recent reported quarter, Q2 2023, Modiv posted revenue of $11.8 million, up 16.7% year-over-year and $540,000 more than expected. The solid sales figures reflect the acquisition of 16 industrial production sites since June last year. The company’s adjusted funds from operations (AFFO), a key measure of cash flow, was 31 cents per diluted share based on $3.3 million.

For the dividend, which was last declared in June this year, Modiv set the monthly payment for common shareholders at 9.583 cents per share. This works out to an annual payment of nearly $1.15 per common share and a yield of 9.11%.

The bulls include Colliers analyst Barry Oxford, who is impressed with Modiv’s successful business model and the company’s ability to expand its portfolio. He writes: “We like the focus on industrial properties and the sale of predominantly retail and office properties. Assets are weighted toward California and the Sunbelt region, where net migration is occurring. Our Buy recommendation is based on these well-located, unique assets and attractive valuation. The company has a slightly elevated level of debt, but has sufficient liquidity to continue to acquire assets and thus grow the company.”

Combined with the Buy rating, Oxford’s $15 price target implies a potential one-year gain of approximately 19%. Based on the current dividend yield and expected price appreciation, the stock has a potential total return profile of ~28%. (To view Oxford’s track record, Click here)

Modiv has a total of four current analyst reviews, all of which are positive, giving the stock a “Strong Buy” consensus rating. The share price is $12.62 and the average price target of $16 suggests ~27% upside potential over the next 12 months. (See Modiv stock forecast)

Gladstone Commercial (GOOD)

Now let’s turn to another REIT, Gladstone Commercial. The company focuses on commercial real estate, including industrial and office space, and prefers to purchase properties with proven strong tenants. The Company’s holdings are primarily located in the Midwest, Southeast and Southwest – particularly the states of Florida and Texas are represented among Gladstone’s portfolio holdings.

For investors, the size of the portfolio and the high occupancy rate are two particularly attractive features of Gladstone’s business. As of last June, Gladstone owned 136 properties in 27 states and had 110 different tenants on the books. The site’s utilization rate is 96%, and the company boasts that its utilization has never dipped below 95%. Since going public in 2003, Gladstone has grown its portfolio by 18% annually.

The most recent acquisition came just last month when Gladstone announced the purchase of two properties in the Dallas-Fort Worth metropolitan area. The first asset, which had a 10-year net lease to a national behavioral analysis therapy company, was purchased for $2.85 million and totaled over 7,700 square feet. The second was a 100,000 square meter industrial facility purchased for $9.075 million.

Gladstone has the income to afford these purchases. The company posted revenue of $38.66 million in 2Q23, its most recent quarterly release. This beat estimates by nearly $1.7 million and increased 6% year-over-year. However, the company posted a net income loss of 19 cents per share, missing forecast by 17 cents per share. On the other hand, another key metric, core funds from operations (FFO), came in at 41 cents per diluted common share, up from 37 cents in the previous quarter, beating expectations by 5 cents. This should be of interest to dividend investors, as FFO is often viewed as supporting the dividend.

Speaking of dividends, Gladstone announced its monthly dividend payments for 3Q23 in July, setting them at 10 cents per common share, or 30 cents for the quarter. With an annual common stock dividend of $1.20, this represents an attractive yield of 9.4%.

Looking at Wall Street, B. Riley analyst Craig Kucera offers several compelling reasons to consider investing in GOOD stock.

“We are increasing our 2023E earnings estimates for Gladstone Commercial as management waives its incentive fee for the remainder of 2023 as GOOD contends with a slower transaction environment and higher interest rates as rate caps expire in mid-2023…While acquisition volume remained relative .” While GOOD was subdued in the second quarter of 2023, capitalization rates have increased significantly in 2023 as cash flow continues to increase through the potential leasing and/or sale of the remaining vacancies in its Austin office properties and management accelerates office property dispositions . “We find shares attractive as they yield approximately 9% while trading at 80% of our estimated net asset value of $17.29,” said the 5-star analyst.

To that end, Kucera rates Gladstone’s stock a “Buy” and sets a $15 price target to express confidence in a 17% one-year upside. (To view Kucera’s track record, Click here)

Overall, this stock receives a Moderate Buy rating from Street analysts, based on three recent analyst ratings, including 2 Buys and 1 Hold. The stock is currently selling for $12.81 and its average price target of $15.67 implies it will gain 22% in value over the next year. (See Gladstone stock forecast)

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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is for informational purposes only. It is very important to do your own analysis before investing.