Generating consistent dividend income from our portfolios is something that I think most of us value. But it’s not always that easy to set this up. We want a high enough dividend yield, but we don’t want to take on too much risk. It’s not easy to find the right risk/reward balance. We have our work cut out for us.
Here are three of my favourite dividend stocks for monthly dividend income.
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Northwest Healthcare Properties REIT
This monthly dividend payer has had its share of troubles. Those troubles resulted from an overly aggressive acquisition strategy, which left the company with an overleveraged balance sheet. This, combined with rising interest rates, spelled disaster for Northwest Healthcare Properties REIT (TSX:NWH.UN).
The result – a 50% dividend cut. And its stock price tumbled from over $14 in 2022 to lows of under $4 in 2023. But today, Northwest has taken steps to improve its balance sheet, its operations, and its risk profile.
Today, the balance sheet is stronger, and the company’s business is strong and steady. Northwest is trading at just over $5, with a dividend yield of 7%. The payout ratio has been reduced to 88% of adjusted cash flow. And, the REIT’s leverage ratio has been reduced to 48.5%. Finally, the business remains a strong business, anchored by a stable long-term lease maturity profile, with a weighted average lease expiry of 13.5 years and a 97% occupancy rate.
Peyto Exploration and Development
This monthly dividend payer is benefitting greatly from the positive fundamentals in the natural gas industry. This includes the natural gas demand profile, which is strong based on record energy demand from coal switching to natural gas and electricity demand, as well as liquified natural gas (LNG) demand.
Peyto Exploration and Development Corp. (TSX:PEY) is well-positioned as a natural gas producer that has one of the lowest cost profiles and a lucrative asset base, as well as access to different premium natural gas markets.
At this time, Peyto is yielding a very generous 7.3%. This energy stock has been paying a monthly dividend for many years now, and it’s supported by strong cash flows, a strong balance sheet, and its bright future.
Northland Power
Northland Power Inc. (TSX:NPI) has a global footprint of 3.4 gigawatts of energy in operation and 2.2 gigawatts under construction. This footprint is diversified both geographically and by energy source. Northland’s renewable assets are located in places like Canada to Northern Europe to Taiwan, and the company has clean-burning natural gas, wind, solar, and battery energy storage assets.
At this time, Northland is yielding just over 5%. The company’s latest results saw it post a net loss of $53 million, compared to a net profit of $262 million in the same period last year. This was due primarily to a fair value loss of $144 million due foreign exchange and interest rate derivative contracts. Operating cash flows increased 163% to $451 million.
Northland is already benefitting from its new battery storage project that went into operation this year. Looking ahead, two of its other major projects, Baltic Power and Hai Long, are nearing the end stages of development. This will mean lower capital expenditures as well as a significant ramp-up in cash flows in the coming two years.
The bottom line
The three monthly dividend-paying stocks that I’ve discussed in this article all have strong industry fundamentals on their side, as well as strong company profiles. Consider adding them to your portfolio for consistent, year-round income.
