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Some companies pay annual or semi-annual dividends, which is common in European stocks. Quarterly dividend payments are the norm for American companies. However, some companies have monthly dividend payments, which some investors appreciate from the perspective of a regular income stream.
Bob Ciura selected for The Street these two dividend stocks with high yields, monthly payouts, and a Buy recommendation from Zack’s.
Horizon
Horizon Technology Finance Corp. (HRZN) is a BDC (Business Development Company) that provides venture capital to small and medium-sized businesses, primarily in the life sciences, technology, sustainability and healthcare IT sectors. Horizon’s specialized expertise knows how to find the best solutions in such risky sectors, which are increasingly finding it difficult to access the capital market.
The company reports returns of 16.3% over the past 12 months. In the past second quarter, total investment income increased by 51.3% year on year, mainly due to growth in interest income. Net investment income per share (IIS) increased to $0.54, approximately 54% higher than in Q2 2022. Net asset value (NAV) per share stood at $11.07, which is 2.4% lower than in Q2 2022. quarter before and 5.3% lower year-on-year.
After paying monthly distributions, Horizon’s undistributed earnings were $1.02 per share as of June 30, indicating a significant cash pile. The three future monthly dividends are set at 0.11, which equates to a dividend yield of more than 11%.
Gladstone Capital
Gladstone Capital (GLAD) is a business development company currently valued at $350 million. Business development companies organize financing for small and medium-sized businesses that do not have direct access to debt markets. Gladstone Capital primarily makes debt investments, which make up about 90% of its assets, but the company also has small equity stakes in some of its portfolio companies.
Since the smaller companies funded by Gladstone Capital and other business development firms struggle to obtain financing elsewhere, BDCs generally generate above-average interest rates from their investments.
Gladstone reported its third-quarter earnings on July 26 and the results were above expectations on both the top and bottom lines. Net investment income per share was 31 cents, four cents better than expected.
Total investment returns were $22.8 million, up 66% year over year, beating estimates by $1.15 million. The increase in investment income was due to higher interest income, which was attributable to increases in the weighted average yield and weighted average principal balance of the company’s interest-bearing investments.
The return on the company’s portfolio affects its ability to generate income and therefore cover costs and make distributions to shareholders. Over time, the company’s portfolio returns have increased to more than 10%. Despite rising financing costs, Gladstone has managed to widen its yield spreads. Gladstone’s portfolio continues to grow in dollar terms and the higher spreads on a larger portfolio lead to profit growth.
We think the current dividend is sustainable; the recent increase is seen as a vote of confidence from management. Gladstone returns almost 10% per year.
Also read: 3 dividend stocks for the long term
Of Editorial of IEX consists of a team of content managers, journalists and analysts, with more than a hundred years of experience in producing and publishing investment information and opinions. The information in this column is not intended as professional investment advice or as a recommendation to make certain investments. It is possible that editorial staff hold positions in one or more of the funds mentioned.
2023-09-12 06:30:00
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