Finding the right mix of income-producing stocks can make the difference between retiring early or needing to work for years into retirement. Even better, finding the right mix of the best monthly dividend stocks to buy can provide a stable and recurring source of income.
Finding stellar stocks that pay out dividends monthly is possible. Here are two of the best monthly dividend stocks to consider adding to your portfolio right now.
Start with a well-diversified option
The need to diversify can’t be understated, particularly in a volatile environment. That’s part of the reason why one of the best monthly dividend stocks to start with is Exchange Income Corporation (TSX:EIF).
For those who are unfamiliar with the stock, Exchange owns a dozen subsidiary companies. Those companies are classified into manufacturing or aviation segments. The result is a well-diversified pick of a dozen smaller profitable companies that can provide a juicy income.
But that’s not even the best part.
Exchange’s subsidiary companies have something unique in common. They all provide a service or create products that serve a niche of the market. Often there is little or no competition in those areas, which provides some defensive appeal to the stock as well.
By way of example, in the aviation segment, those subsidiaries provide medevac, passenger, and cargo services to the remote regions of Canada’s north. Turning to the manufacturing segment, the list includes cell tower installation services as well as custom manufacturing of window-wall systems.
The uniqueness of those subsidiaries translates into strong results and by extension, a healthy dividend. That dividend currently boasts a yield of 5.02%, making it one of the better-paying stocks on the market.
It also means that prospective investors who invest $40,000 can look to generate a monthly income of just over $165. Keep in mind that investors not ready to draw on that income yet can choose to reinvest that income. This can provide a substantial boost to any retirement income over the long term.
Finish off with a renewable source of income
Utilities are some of the best defensive stocks on the market. Renewable energy stocks like TransAlta Renewables (TSX:RNW) boast that same defensive appeal. They also offer the massive long-term potential of renewable energy.
TransAlta boasts a portfolio of solar, wind, hydro, and gas facilities located across Canada, the U.S., and Australia. Those facilities provide a secure and recurring source of revenue for the company, backed by long-term regulated contracts.
That revenue stream also provides investors with a juicy monthly dividend.
As of the time of writing, TransAlta offers a yield of 7.90%, making it an appealing choice for income-seeking investors. Using that same $40,000 example, investors can expect a monthly income of over $260 from TransAlta.
Part of the reason for that high yield is that TransAlta’s stock has dropped over 35% over the trailing 12-months.
The decline can be partly attributed to the overall market segment. Throw in rising interest rates and high inflation, and you have shorter-term volatility driving the stock lower.
So then, why is TransAlta one of the best monthly dividend stocks? The key point for investors to note is that TransAlta is a long-term option. The market will improve, and TransAlta’s stock price will rise along with the market.
Fortunately, right now investors can buy TransAlta at a discounted rate and begin to enjoy that juicy monthly income.
The best monthly dividend stocks money can buy
No investment is without risk, and that includes both TransAlta and Exchange. This is why investors should only consider these stocks as part of a larger, well-diversified portfolio.
In my opinion, one or both of the stocks would do well to augment any retirement income.