Best monthly dividend stocks to watch

Monthly dividend stocks in brief

Monthly dividend stocks are shares in companies which distribute dividends to shareholders every month. This is different to the vast majority of businesses, with dividends most commonly paid out on a quarterly, semi-annual or annual basis. Unsurprisingly, these stocks are often working in sectors that provide defensive and reliable cash flows — including REITs (Real Estate Investment Trusts), BDCs (Business Development Companies) and utilities.

The obvious attraction is the consistent cash flow, which can be useful for tax planning purposes, pensioners or others relying on regular dividend income. If you reinvest the dividends then you also get faster compounding — though this point is debatable — and individuals also benefit from smoother cash flow management.

Arguably, there’s also lower volatility in dividend income; a missed dividend in a quarterly stock means a longer wait, whereas monthly payers spread risk over a shorter period.

However, as ever, there are drawbacks. Monthly dividend stocks tend to be mature companies with limited growth potential, which makes sense when you consider excess capital is being returned to investors rather than reinvested.

But perhaps more significantly, some monthly dividend businesses can feel pressurised to maintain payouts over long-term financial health, which can lead to dividend cuts further down the line. And many analysts consider that while some monthly dividend stocks provide high yields, even better returns are available with strong quarterly dividend stocks.

It’s also important to consider expense fees — REITs and BDCs are often more expensive to own than traditional dividend stocks. And due to their income appeal, some monthly dividend stocks trade at a premium valuation which can make them susceptible to price shocks.

How to invest in monthly dividend stocks with us

1. Learn more about monthly dividend stocks
2. Download the IG Invest app or open a share dealing account online
3. Search for monthly dividend stocks on our app or web platform
4. Choose how many shares you’d like to buy
5. Place your deal and monitor your investment

Investors look to grow their capital through share price returns and dividends - if paid.

But the value of investments can fall as well as rise, past performance is no indicator of future returns, and you could get back less than your original investment.

We also offer many monthly dividend ETFs, including the popular the JPMorgan US Equity Premium Income Active UCITS ETF [JEIP], which sells covered calls on stocks and use these to pay the dividend. It sports a competitive expense fee of 0.35%.

Top monthly dividend stocks to watch

These were some of the highest-yielding monthly dividend stocks as of February 2025.

1. Oxford Lane Capital (NASDAQ: OXLC)
2. Eagle Point Credit (NYSE: ECC)
3. BlackRock Capital Allocation Term Trust (NYSE: BCAT)
4. OFS Credit (NASDAQ: OCCI)
5. Orchid Island Capital (NYSE: ORC)
6. ARMOUR Residential REIT (NYSE: ARR)
7. Ellington Credit (NASDAQ: EARN)
8. Oxford Square Capital (NASDAQ: OXSQ)
9. AGNC Investment (NASDAQ: AGNC)
10. Horizon Technology Finance (NASDAQ: HRZN)

Oxford Lane Capital (NASDAQ: OXLC)

Oxford Lane Capital primarily invests in collateralised loan obligations, which are in simple terms securities backed by a pool of loans to corporations. The company’s strategy is to provide high yield returns to investors through CLO equity tranches — allowing it to offer very significant dividends, with a proven track record of strong payments.

However, the stock is highly exposed to the performance of its CLOs, which are sensitive to credit market conditions, interest rate changes, and economic cycles. A downturn in these markets can rapidly affect the dividend.

Dividend Yield: 20.23%

Eagle Point Credit (NYSE: ECC)

Eagle Point Credit also focuses on investing in CLO equity tranches, which again offer the potential for high returns but also come with significant risk. The fund’s portfolio does invest in other asset-backed securities, is actively managed and offers high-yield potential, especially in a favourable credit market.

Like Oxford Lane, the risk comes from the volatility of the CLOs — the heavy focus on the financial product exposes it to substantial losses during economic downturns when loan defaults rise.

Dividend Yield: 19.29%

BlackRock Capital Allocation Term Trust (NYSE: BCAT)

BlackRock Capital Allocation Term Trust seeks to provide a high level of income by investing across a broad range of asset classes, including equities, fixed income, and alternative investments. The fund is popular, because it benefits from BlackRock’s expertise in global asset allocation and risk management. And investors also enjoy a diversified portfolio, which reduces exposure to any single asset class and aims for stable returns.

However, it still faces exposure to market volatility, and both fixed income and equities may underperform, especially in a down market. Additionally, as a closed-end fund, it can trade at a premium or discount to its NAV, which can make picking an entry point complex.

Dividend Yield: 18.91%

OFS Credit (NASDAQ: OCCI)

OFS Credit is another closed-end fund that primarily invests in CLOs and other credit instruments, including structured finance investments.

However, this fund targets high risk, high reward returns. Its strong point is the potential for high income, because CLOs typically offer high yields but again there is substantial downside risk in the event of a downturn.

Dividend Yield: 18.21%

Orchid Island Capital (NYSE: ORC)

Orchid Island Capital is a REIT which focuses on investing in residential mortgage-backed securities. The company's portfolio consists mainly of agency RMBS, which are backed by government-sponsored enterprises. Orchid’s strength lies in the stability of its income generation, as agency RMBS are guaranteed by the US government, providing some level of security.

However, it is still highly sensitive to interest rate changes, as rising rates can reduce the value of its holdings, potentially impacting its profitability and dividend payments. Additionally, prepayment risks in the mortgage market can affect returns.

Dividend Yield: 17.25%

ARMOUR Residential REIT (NYSE: ARR)

ARMOUR Residential REIT also invests in agency mortgage-backed securities. The company’s portfolio provides stable dividends supported by its MBS investments, which tend to generate consistent income, particularly in a low-interest-rate environment.

However, the company faces significant risks related to elevated interest rates, as rising rates can lower the market value of its securities. Like Orchid Island, the REIT is vulnerable to prepayment risk and a slowdown in the housing market.

Dividend Yield: 15.21%

Ellington Credit (NASDAQ: EARN)

Ellington Credit focuses on investing in mortgage-backed securities, commercial real estate debt, and other credit assets. The company has a solid reputation for generating attractive returns in credit markets.

Its strength lies in its diversified portfolio, which helps reduce risk by spreading investments across various credit sectors. However, it still faces exposure to interest rate risk, as in line wither others on this list, rising rates can negatively affect the value of its MBS holdings.

Dividend Yield: 14.81%

Oxford Square Capital (NASDAQ: OXSQ)

Oxford Square Capital invests in a variety of credit instruments, including CLOs and corporate debt. The company targets high-yield returns through investments in lower-rated securities, which as a trade-off carry higher risk.

The company is highly exposed to the performance of credit markets, and unexpected changes in interest rates or an economic downturn could hurt the value of its investments. Its focus on lower-rated debt also means it is more vulnerable to defaults and credit deterioration, which can lead to dividend cuts.

Dividend Yield: 14.79%

AGNC Investment (NASDAQ: AGNC)

AGNC Investment is a mortgage REIT that also largely invests in residential mortgage-backed securities, alongside other real estate assets. The company’s generates high yields from its portfolio of agency RMBS, which are backed by the US government.

However, like other mortgage REITs, AGNC is highly sensitive to interest rate movements. Rising rates can reduce the value of its securities, while a flat yield curve can squeeze profit margins. The company also faces risks related to prepayment rates and the broader real estate market, which does not always go up.

Dividend Yield: 14.15%

Horizon Technology Finance (NASDAQ: HRZN)

Horizon Technology Finance is a business development company that provides financing to venture capital-backed companies in the technology, life sciences, and sustainability sectors.

The company focuses on providing secured loans to growth-stage companies, earning interest income and fees from these investments. While strong returns are on offer, the company is exposed to the risks of its portfolio companies failing to meet growth expectations — or, commonly, encountering financial difficulties, which can lead to defaults. It also comes with the generic risks of the volatile venture capital and private equity markets.

Dividend Yield: 13.81%

Monthly dividend stocks summed up

• Monthly dividend stocks are shares in companies which distribute dividends to shareholders every month.
• These stocks are often working in sectors that provide defensive and reliable cash flows
• Some monthly dividend businesses can feel pressurised to maintain payouts over long-term financial health
• Monthly dividend stocks can trade at a premium valuation given their desirability