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Dividends during uncertainties


Monthly dividend-paying companies

Monthly dividends 🤔💰 Is it even possible? It definitely is, looking at companies with high dividend pay-outs distributed to investors throughout the financial year.

As we hunt for dividends as EasyVSTRs, we look into two companies that paid dividends more than once in a 12-month period.

STAG Industrial Inc (STAG)

As a real estate investment trust, STAG Industries acquires and operates on various properties throughout the U.S. The group has an annual dividend of $1.46, trading with a dividend yield of 3.75%. Given the funds from operations (FFO) per share of $2.06 plus the annual dividend, the group indicates a 70% dividend pay-out, which is distributed through a monthly instalment to investors.

During the fourth quarter of the group's 2021 fiscal year (FY21 Q4), FFO increased by $90 million, representing a 19% growth from $75.5 million in the previous comparative period (PCP). FFO per share increased by 9% to $2.07 from $1.90 in the PCP.

Given the strong growth in produced cash from net operating income of $438 million during FY21, which increased by 14% within the fourth quarter, cash available for distribution increased by 15% within the period to $74.1 million from $64.0 million in the previous period. In 2021 STAG raised $386.3 million. This was through a follow-on offering.

The group sold eight buildings during the period, which resulted in a net gain of $62.5 million, and acquired 35 buildings valued at $686.3 million. The acquisitions have a capitalization rate of 5% - this refers to the properties’ natural rate of return. As of December 31, 2021 occupancy rate was at 96%, a slight decline from 97% in the PCP.

As guidance for FY22, STAG expects FFO per share to be at a low of $2.15 and a high of $2.19. Acquisitions volume is expected to be between $1 billion and $1.2 billion.

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Main Street Capital Corp (MAIN)

Investing in the middle market, Main Street is an investment firm focused on long-term debt and equity-capital-requiring companies. The firm invests in small and private companies. The capital under management amounts to $5.1 billion as of writing, with 177 cumulative investments. With an annual dividend of $2.58, Main Street’s dividend yield sits at 6.02%. Given the trailing 12-month earnings-per-share of $5.45, the firm has a dividend payout of 47% that's paid to investors throughout the year.

The firm expects to release its full-year/fiscal year and FY21 Q4 results on February 24, 2022. Distributable net investment income is expected to be at around $0.75 and $0.77 per share, with a net investment income above $0.71 per share.

Net asset value per share is estimated to be above $25 per share, which, as a result of the "adjustment for the supplemental dividend of $0.10 per share paid in December 2021, represents an increase of approximately $1.07 to $1.13 per share, or 4.4% to 4.7%, from the NAV per share of $24.27 as of September 30, 2021," the company said.

Main Street’s total investments in the Lower Middle Market (LMM) are estimated at $316.3 million for the quarter. Notwithstanding the increase in lending cost, the total cost in the LMM portfolio decreased by $16.4 million.

"We believe that these results demonstrate the continued strength of our overall platform... Our unique lower middle market investment strategy continues to provide benefits with record fourth quarter and full-year gross originations of approximately $315 million and $560 million, respectively," Dwayne L. Hyzak, Main Street's chief executive officer, commented on the preliminary result.

"We also produced record fourth quarter and full-year net originations in our private loan investment strategy of approximately $290 million and $350 million, respectively." This resulted in "another strong quarter and a record year for distributable net investment income, with distributable net investment income exceeding the monthly dividends paid to our shareholders by approximately 20% or more for the quarter, and approximately 12% for the year,” he added.

For non-U.S shareholders through the dividends tax treatment of 2021, the total dividends paid for FY21 was $2.575 per share.

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Informed decision

For investors, dividends are, at times, the influencing factor when making an investment decision. These pay-outs may present themselves as an alternative source of income during the unprecedented period of geopolitical factors affecting the markets and global economy, while inflation continues to take a toll on consumers and the global market.

As such, while dividend pay-outs may be of benefit to investors, this may burn cash in the process, leading to lower retained earnings, which are calculated using:

Previous retained earnings + Profits or Loss for the period – Dividends paid = Retained earnings 

Retained earnings are funds the company manages to carry over to the following period.

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Sources – EasyResearch, Main Street Capital Corp, STAG Industrial Inc, FinanceCharts, Nasdaq.

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