We Back Tested 20 Monthly Dividend Stocks — These 5 Beat the Market

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By and large, investments usually are geared to deliver 1) capital appreciation, or 2) income. Very often, the higher either goal is emphasized, the greater the ratio is skewed, so that those delivering fat dividends will have limited upside, and high flyers will have miniscule, if any, yields. 

The S&P 500 Index has been lauded for many years as a great benchmark for capital appreciation, and has been lauded by Warren Buffett and many others. Stocks that can outpace the S&P 500 are certainly considered prized assets to many portfolios. Finding stocks that can not only accomplish that feat but also deliver yields above 5% are rare, but not totally unheard of, and most investors would consider them win/win additions to any portfolio. 

24/7 Wall Street has covered an extensive collection of high-yielding dividend stocks from its database in past articles. However, only a select smaller percentage of them can be said to pay monthly high dividends AND outpace the S&P 500. We back tested a random 20 past monthly dividend stocks and identified the following five (5) for the consideration of investors who want their cake and eat it too. For reference sake, here are the S&P 500 returns: 1-year: 13.48% 3-year: 64.25%  5-year: 95.12%.

Main Street Capital

Main Street Capital Corporation (NYSE: MAIN)

Yield: 7.21%

Headquartered in Houston, TX, Main Street Capital specializes in providing financial solutions for lower and middle market companies. Its BDC operations focus on private equity and debt capital for companies for such corporate functions as: 

• Management buyouts
• Growth financings
• Acquisitions
• Recapitalization
• Refinancings

Main Street Capital deals directly with corporate entrepreneurs, business owners, and management teams. Most of their  “one-stop” financing alternatives are standalone, and not syndicated. The company’s sweet spot client has annual revenues between $10 million and $150 million.

While its dividend yield is already a high 7.21%, Main Street Capital’s overall returns and growth component isn’t shabby. It averages close to double the S&P 500 across the board, with 1-year return: 39.30%, 3-year return: 103.62%, and 5-year return: 199.38%. 

EPR Properties

EPR Properties (NYSE:EPR)

Yield: 6.08%

In real estate, the difference between a net lease and a gross lease is that in a net lease, the tenant or lessee has to pay all costs and expenses. EPR Properties is a leading net lease REIT operator that focuses on a lucrative, but specialized type of property.

Just as some REITs specialize in mortgage securities, others manage commercial real estate properties, and some will focus on retail shops, factories, and other areas. Kansas CIty, MO headquartered EPR Properties bills itself as “The Diversified Experiential REIT”. Pioneering the particulars of the movie theater business, EPR currently deploys its $6.8 billion + AUM through  ownership and management of:

• 154 commercial theatres among 17 operators  
• 11 ski resorts among 3 operators
• 58 Family Entertainment “Eat & Play” Centers in collaboration among 9 operators with partners like Topgolf; 
• 25 Attractions (i.e., amusement parks, water parks, and indoor skydiving centers) among 8 operators; 
• 4 Experiential Lodging properties, which provide lodging adjacent to some of the aforementioned entertainment and/or resort properties among 3 operators; 
• 22 fitness and gym locations among 9 operators; 
• 1 Cultural property (City Museum in St. Louis, MO); 
• 1 Gaming (i.e, casino) Resort property (Resorts World Catskills in Thompson, NY)
• 9 Private School locations operated by Endeavor Schools
• 46 Child-care centers among 4 operators 

EPR Properties are located in 44 different states within the USA. Dividend investors will appreciate that EPR pays out dividends monthly. Falling interest rates and $263 million in new acquisitions and developments have boosted EPR’s funds from operations (FFO) by 5.3% and made the cost of capital much more attractive for further expansion. 

1-year return: 43.41%.  3-year return: 46.57%  5-year return: 149.78%  

Gladstone Capital Corporation

Gladstone Capital Corporation (NASDAQ: GLAD)

Yield: 7.34%

McLean, VA based Gladstone Capital Corporation is a registered BDC that also has a private equity component. The company has a lengthy history in the sector, and has invested in excess of $2.5 billion in over 260 transactions. 

On the BDC side, Gladstone Capital uses its $4 billion AUM war chest to originate debt financings in a variety of configurations, including senior term loans, revolving credit lines, secured first and second term liens, unitranche loans, senior or junior subordinated loans, and mezzanine loans, as well as common stock, preferred stock, and/or warrants. Use of proceeds can include, growth capital, acquisitions, refinancings, change of control, and buy & build strategies. Industry agnostic, Gladstone qualification criteria for prospective financing deals from $7 million to $30 million is for companies with revenues between $20 million to $150 million and $3 million to $25 million EBITDA. 

On the private equity side, Gladstone Capital will participate in acquisitions, buyouts, or recapitalizations. Its preferred exit strategies can manifest in IPOs, third party strategic acquisitions, or comparable market transactions. The company’s 1-year return is 32.88%; 3-year return is 82.05%, and 5-year return is 206.28%. 

PennantPark Investment Corporation

PennantPark Investment Corporation (NYSE: PNNT)

Yield:  14.03%

Whereas BDCs predominantly engage in private debt, private equity firms invest for significant ownership stakes. PennantPark is a Miami, FL headquartered Business Development Company (BDC) which also has an equities appetite that has it operating often as a private equity company, rather than, ironically, a public company BDC. Pennant Park’s total portfolio is $1.328 billion, containing 152 companies across 34 different industries. The average PNNT investment sized deal is $8.1 million. The company engages in direct senior secured loans, mezzanine debt, and equity investments. These financings can manifest in an array of configurations: preferred stock, warrants, options, senior secured debt, mezzanine loans, and other types of debt securities, as well as direct, non-controlling equity investments. The company even advertises that its due diligence process is very much borrowed from the private equity industry, including viable exit strategies for its equity financed allocations. 

PennantPark’s 1-year return is 13.17%, 3-year return is 74.28%, and its 5-year return is 317.22%. With a double-digit 14.03% yield, PennantPark Investment Corporation can be considered a true unicorn income/growth win/win stock. 

Energy Transfer LP

Energy Transfer LP (NYSE: ET)

Yield: 7.23%

For the past 29 years, Dallas, Texas based Energy Transfer LP  has built a solid business for itself by providing storage and transport of crude oil, natural gas, natural gas associated liquids (NGL), and refined products. 

Presently, Energy Transfer ranks as the third largest US midstream company by market cap size, which is $59.9 billion. Its supply chain network covers Texas, New Mexico, West Virginia, Pennsylvania, Ohio, Oklahoma, Arkansas, Kansas, Montana, North Dakota, Wyoming, and Louisiana. Boasting over 125,000 miles of continental US infrastructure under its umbrella, Energy Transfer’s business structure and forward thinking strategy situates it very advantageously going forward.

Energy Transfer is a Limited Partnership and is addressing the growth of LNG demand with expanded capex, with an additional $2 billion allocation for recent acquisitions, such as WTG Midstream, Lotus Midstream, and Crestwood Equity Partners. The company is also ready to kickstart the anticipated commencement of its long delayed Lake Charles LNG facility, and recently inked a deal with Cloudburst to supply power to several developing data centers located across Texas. 

1-year return: 14.96%.  3-year return: 123.02%  5-year return: 315.55%

Although PennantPark Investment Corporation’s combination of a 14.03% yield and a 5-year 317% return is an anomaly, albeit a highly coveted one, other monthly dividend stocks with yields above 6% and gains of 50% or more above the S&P 500 Index exist. They can be identified with some research, including from other articles that can be found in 24/7 Wall Street. 

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