For investors seeking a steady stream of passive income, monthly dividend stocks are worth considering. While many dividend-paying stocks dish out cash to shareholders on a quarterly basis, companies that pay monthly dividends can be found among real estate investment trusts (REITs) and business development companies (BDCs). These monthly dividend stocks can be particularly attractive to retirees, income-focused investors, and those aiming to enhance returns through reinvestment.

While the allure of regular monthly payouts is evident, prioritizing the sustainability of these dividends is paramount. The stocks here feature yields ranging from around 5% to over 14% - well above the S&P 500 Index ($SPX) average of 1.6% - but it's just as important to invest in companies with healthy balance sheets and diversified tenant bases. Here's a closer look at 5 top monthly dividend stocks.

1. Agree Realty Stock

Agree Realty Corporation (ADC) stands out as a reliable retail Real Estate Investment Trust (REIT) with a consistent track record of providing monthly dividends. Specializing in acquiring and developing properties leased to retail tenants through long-term net leases, ADC maintains a steady cash flow.

In fact, operating cash flow was up nearly 60% in the most recent quarter. ADC also beat quarterly revenue expectations, raking in $136.81 million.

The REIT currently offers shareholders a monthly dividend of $0.25 per share, which translates to a forward yield of 4.83%.

Analyst sentiment is positive, with 8 recommending a "strong buy," 2 suggesting a "moderate buy," and 4 maintaining a “hold.” The average price target is $68.46, about 12.7% higher than current levels.

2. Apple Hospitality Stock

With a market cap of $3.69 billion, Apple Hospitality REIT (APLE) holds a hospitality-focused real estate portfolio, focused on upscale hotel brands like Hilton (HLT). 

APLE beat on funds from operations (FFO) and on revenue in its most recent earnings report, and Wall Street expects FFO to rise modestly in the current fiscal year. The REIT also reported healthy growth in operating cash flow and net cash flow during the latest quarter.

The monthly dividend for Apple Hospitality is $0.05 per share, which results in a forward yield of 5.94%.

Wall Street's mean price target for APLE is $18.33, more than 13% above current levels. Analyst consensus leans towards optimism, with 3 recommending a "strong buy" and 5 advising a "hold."

3. Realty Income Stock

Realty Income Corporation (O), established in 1994 and self-billed as "The Monthly Dividend Company," is a REIT that acquires high-quality, freestanding, single-unit commercial properties and leases them to reputable clients under long-term net lease agreements, typically exceeding 10 years.

The REIT edged past analysts' FFO and revenue estimates in its Q3 results, and Wall Street is targeting 4.2% FFO growth in fiscal 2024. Net cash flow more than doubled on a year-over-year basis in Q3.

Currently, O pays a monthly dividend of $0.26 per share for a forward yield of 5.38%.

Analyst sentiment indicates a "moderate buy," with 7 “strong buy” recommendations, 1 “moderate buy,” and 8 “hold” recommendations. The mean target price is $62.56, representing a premium of about 11% from current levels.

4. Ellington Financial Stock

Ellington Financial Inc. (EFC) is a diversified financial asset company involved in residential and commercial mortgage loans, mortgage-backed securities, and consumer loans. Utilizing strategic hedging and risk management, the company focuses on generating consistent income.

EFC missed the Street's FFO forecast in its Q3 results, but surpassed revenue estimates. FFO is expected to rise 11% in fiscal 2024.

Currently, EFC pays shareholders a monthly dividend of $0.15 per share, and yields a staggering 14.2%.

The analyst consensus is a "moderate buy," with 5 “strong buy” recommendations, 1 “moderate buy,” and 2 “hold” recommendations. The mean target price for Ellington Financial stock is $14.41, suggesting a potential upside of about 14.4%.

5. Gladstone Land Stock

Gladstone Land Corporation (LAND) operates as a real estate entity with a focus on acquiring and leasing farmland across 14 states in the U.S., which differentiates it from many other REITs that invest in commercial or residential real estate. This unique focus allows the company to capitalize on the essential and enduring need for farmland.

The REIT beat on adjusted FFO and on revenue in its Q3 results, with another 4% growth in AFFO projected for fiscal 2024. Meanwhile, revenue is expected to rise 3.5% this fiscal year.

LAND pays investors $0.05 per share each month for a forward yield of 4.08%.

Analysts suggest a "moderate buy," with 4 “strong buy” votes and 2 recommending a "hold." The mean target price for Gladstone Land stock is $18.33, implying a potential upside of about 35.9% from the current stock price.