Many companies pay quarterly dividends. That might be an adequate cash flow for most income investors, but there's also a rarer breed of stocks and exchange-traded funds (ETFs) that cut monthly checks.
Today, I'll review three of those monthly payers that I personally own -- Realty Income(NYSE: O), JPMorgan Equity Premium Income ETF(NYSEMKT: JEPI), and JPMorgan Nasdaq Equity Premium Income ETF(NASDAQ: JEPQ) -- and explain why they're still worth buying.
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1. Realty Income
Realty Income is one of the world's largest real estate investment trusts (REITs). A REIT buys up properties, collects rental income, and needs to pay out at least 90% of taxable earnings to its investors as dividends to maintain a favorable tax rate.
As a net lease REIT, Realty Income's tenants are also obligated to cover most of their own property management expenses -- including maintenance costs, property taxes, and insurance fees.
That simple business model enables the self-proclaimed "Monthly Dividend Company" to generate plenty of cash to cover its dividends. It's paid consecutive monthly dividends ever since its founding in 1969, and it's raised its payout 124 times since its IPO in 1994. Its tenants mainly consist of resilient retailers like 7-Eleven, Dollar General, Dollar Tree, and Walmart.
Realty Income has kept it occupancy rate above 96% over the past three decades, it recently expanded by merging with Spirit Realty, and it now owns 15,450 properties worldwide. Its adjusted funds from operations (FFO) have also consistently risen over the years, even as many of its top tenants grappled with challenging macro downturns.
Realty Income, like most other REITs, lost its luster over the past two years as interest rates rose. But it now pays a historically high forward yield of 5.6%, and its stock looks dirt cheap at 13 times last year's adjusted FFO per share.
2. JPMorgan Equity Premium Income ETF
JPMorgan's Equity Premium Income ETF holds a diverse basket of 130 stocks. Its top holdings include big blue chips like Amazon, Microsoft, Trane Technologies, and Progressive.
What sets the ETF apart from many of its peers is its focus on generating stable income through covered calls on the S&P 500. Those covered calls, which are written monthly, boost the total yield of the fund's underlying holdings. It doesn't write those calls directly -- it uses equity-linked notes (ELN), which are pinned to the calls, but generate more tax-efficient returns.
That's how this ETF can pay a high 30-day SEC yield of 7.6%. It pays its dividends a monthly basis and charges a low expense ratio of 0.35%.
All of those strengths make it a conservative way to generate a lot of extra cash. But due to their inherent design, covered call ETFs often limit their own gains during bull markets. On the flip side, they can also generate stable dividends for investors who simply want to live off stable monthly payments instead of striving to beat the market.
3. JPMorgan Nasdaq Equity Premium Income ETF
If the JPMorgan's Equity Premium Income ETF's covered call ELN strategy sounds lucrative, but you want more growth with an even higher yield, you can consider investing in its sister fund -- the JPMorgan Nasdaq Equity Premium Income ETF.
This ETF holds 98 stocks, and its top holdings include all the "Magnificent Seven" companies. More than 40% of its holdings are in the information technology sector, while less than 15% of its sister fund is allocated to the growing sector.
Just like its sister fund, this ETF uses ELNs for more tax-efficient returns instead of directly selling covered calls. It also charges the same low expense ratio of 0.35%. But instead of writing covered calls on the S&P 500, it writes its calls against the more volatile Nasdaq-100 index.
That volatility generates higher premiums for the covered calls, which enables it to boost its 30-day SEC yield to a much higher 10.9%. It also pays out its dividends on a monthly basis -- so it might be a great choice for investors who can stomach a little more volatility in exchange for fatter monthly checks.
Should you invest $1,000 in Realty Income right now?
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Leo Sun has positions in Amazon, J.p. Morgan Exchange-Traded Fund Trust - JPMorgan Nasdaq Equity Premium Income ETF, JPMorgan Equity Premium Income ETF, and Realty Income. The Motley Fool has positions in and recommends Amazon, Microsoft, Realty Income, and Walmart. The Motley Fool recommends Progressive and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
