3 Monthly Dividend Stocks to Beat Market Volatility

Here are three monthly paying dividend stocks trading on the TSX that can help you beat stock market volatility.

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Equity markets are extremely volatile when investor sentiment turns bearish. While a bear market lasts for an average of 289 days, it drags the valuations and share prices of companies across various sectors significantly lower.

Amid these uncertainties, it makes sense to invest in quality dividend stocks that can help you earn a stable stream of recurring income. Moreover, the pullback in share prices allows you to enjoy a high dividend yield, as the two are inversely related.

Here are three such monthly dividend stocks you can consider buying to beat the bear market volatility.

Northwest Healthcare REIT

A recession-resistant real estate investment trust (REIT), Northwest Healthcare REIT (TSX:NWH.UN) provides you with exposure to the healthcare and real estate sectors. Similar to most other REITs, Northwest Healthcare owns, acquires, and manages a portfolio of income-generating properties that are leased out to clients on a long-term basis.

These properties produce rental income, which is distributed to shareholders in the form of dividends. Northwest Healthcare pays investors a monthly dividend of $0.067 per share, indicating a tasty forward yield of 9.7%.

Northwest Healthcare has properties located in North America, Europe, Brazil, Australia, and New Zealand. Investors should expect its dividends to rise higher, as the company continues to acquire additional properties, thereby increasing future cash flows.

However, rising interest rates in the last 12 months will also act as a headwind for REITs, which generally use debt to fund their expansion plans.

Priced at 10 times forward earnings, Northwest Healthcare stock is also trading at a discount of 30%, given consensus price target estimates.

TransAlta Renewables stock

One of the largest clean energy companies in Canada, TransAlta Renewables (TSX:RNW) pays investors a monthly dividend of $0.078 per share, offering a forward yield of 7.5%. It operates 50 renewable power-generation facilities, including wind, gas, and hydro.

TransAlta forecasts adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) between $495 million and $535 million in 2023, with free cash flow at $360 million, given its midpoint estimate.

Todd Stack, president of TransAlta Renewables, stated, “Our 2023 outlook highlights resilient cash flow expectations with a payout ratio of approximately 100%. We are expecting to bring online new renewable and transmission assets in Australia in 2023, along with a return to service of our Kent Hills facilities in the latter part of the year.”

Exchange Income stock

The final monthly dividend stock on my list is Exchange Income (TSX:EIF), which currently yields 4.5%. EIF has already generated market-thumping returns for long-term investors, as the stock is up 3,000% since its initial public offering in 2004, after adjusting for dividends.

Despite its stellar gains, EIF stock is priced at 15 times forward earnings, which is very reasonable given analysts expect the company to improve profit margins by 11.4% annually in the next five years.

Despite a sluggish macro environment, EIF increased sales by 46% to $2.1 billion while adjusted EBITDA rose 38% to $456 million. An expansion in profit margins allowed the company to reduce its payout ratio from 99% in 2021 to 73% in 2022. Its free cash flow also stood at a record $176 million, rising 20% year over year.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Aditya Raghunath has positions in TransAlta Renewables. The Motley Fool recommends NorthWest Healthcare Properties Real Estate Investment Trust. The Motley Fool has a disclosure policy.

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