Most stocks that pay dividends, do so on a quarterly basis. Some companies pay dividends on a semi-annual or annual schedule. But for investors looking for more frequent payouts, monthly dividend stocks may be appealing.

Even better, some monthly dividend stocks have high dividend yields above 5%. This article will analyze 3 high-yield monthly dividend stocks in greater detail.

Ellington Residential Mortgage REIT (EARN)

EARN acquires, invests in, and manages residential mortgage and real estate-related assets. Ellington focuses primarily on residential mortgage-backed securities, specifically those backed by a U.S. Government agency or U.S. government-sponsored enterprise.

In this way, Ellington Residential differs from most other REITs. The typical REIT owns physical properties and leases those properties to tenants. Ellington Residential does not invest in physical properties.

Ellington Residential is a micro-cap, with a market capitalization just under $100 million. Investors should consider the unique risks and characteristics of micro-cap stocks, which are typically thinly traded and can be prone to greater volatility.

EARN achieved a net interest margin of 1.28% in Q3. At quarter end, Ellington had $25.4 million of cash and cash equivalents, and $2.6 million of other unencumbered assets. The debt-to-equity ratio was 9.1x. Book value per share declined from the prior quarter to $7.78, a 14% decrease.

Ellington Residential has a few avenues of growth, which all revolve around optimizing their MBS portfolio. Capitalizing on opportunities driven by market volatility, particularly around the rate hiking cycle and quantitative tightening, could also bring growth. Additionally, Ellington will protect their book value and manage volatility through interest rate hedges and liquidity management.

Generating growth will be important for the company’s ability to maintain its high dividend payout. Shares yield nearly 15%.

ARMOUR Residential REIT (ARR)

ARMOUR Residential is a mortgage REIT that was formed in 2008. The trust invests primarily in residential mortgage-backed securities that are guaranteed or issued by a United States government entity including Fannie Mae, Freddie Mac and Ginnie Mae.

ARMOUR reported Q3 results on October 26th, 2022. It generated a comprehensive loss of $(155.7) million or $(1.26) per common share. Distributable Earnings were $38.8 million, which represents $0.32 per common share.

The REIT paid common stock dividends of $0.10 per share per month during the quarter and raised $167.2 million of capital by issuing 22,733,043 shares of common stock at $7.36 net proceeds per share, after fees and expenses. Management has also repurchased 780,000 shares of common stock, at an average cost of $4.96 per share. Net interest income was $25.1 million while the net interest margin of 2.21% was down 1 basis points from the prior quarter.

Balance sheet leverage had been moving down slightly, but it saw an uptick again this past quarter. However, we do not forecast significant movement in either direction from this point. Interest coverage has declined with spreads but also appears to have stabilized, so we are somewhat optimistic moving forward, while keeping in mind the significant potential for volatility.

Book value per common share was $5.83 while total liquidity was $469.3 million. The debt to equity ratio was 8.7 to 1 while leverage, net of TBA Security short positions, was 7.8 to 1. Implied leverage, adjusted for forward settling sales and unsettled purchases, was 7.3 to 1. ARR yields over 20%.

Sabine Royalty Trust (SBR)

Sabine Royalty Trust is an oil and gas trust set up in 1983 by Sabine Corporation. At initiation, the trust had an expected reserve life of 9 to 10 years; the current estimated life of the trust is 8 to 10 years.

The trust consists of royalty and mineral interests in producing properties and proved oil and gas properties in Florida, Louisiana, Mississippi, New Mexico, Oklahoma, and Texas. It is roughly 2/3 oil and 1/3 gas in terms of revenues.

The trust’s assets are static in that no further properties can be added. The trust has no operations but is merely a pass-through vehicle for royalties. SBR had royalty income of $60.9 million in 2021.

In mid-August, SBR reported (8/11/22) financial results for the second quarter of fiscal 2022. Oil Production edged up 2% over the prior year’s quarter while production of gas grew 75%. In addition, the average realized prices of oil and gas grew 76% and 43%, respectively, thanks to the sanctions of western countries on Russia, which have led to a rally of oil and gas prices to 13-year highs. As a result, distributable cash flow per unit more than doubled, from $0.78 to $2.05.

Moreover, the sanctions on Russia are not likely to be withdrawn anytime soon. As a result, SBR is likely to post 10-year high distributable cash flow per unit this year.

Royalty trusts like SBR are essentially bets on commodity prices. As long as oil and gas prices remain high, SBR should be able to pay dividends. The stock currently yields ~10%.
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Bob Ciura has worked at Sure Dividend since October 2016. He oversees all content for Sure Dividend and its partner sites. Bob received a Bachelor’s degree in Finance from DePaul University, and an MBA with a concentration in Investments from the University of Notre Dame.