How to value stocks: A beginner’s guide


Written by:


Stocks would probably be terrible lovers.


They’re irrational, stress-inducing, and despite them telling everyone else about the “efficient-market hypothesis,” we all know that things aren’t always what they seem.

So how does the average retail investor find true love in this age of zero-commission trading and short squeezes? How do we know it’s more than just another pump and dump?


Investors like Warren Buffet would suggest investing in value stocks—they have solid fundamentals and enough room for steady, sustainable, and long-term growth. To find these stocks, professional investors use sophisticated valuation methods to find the intrinsic value of the stock instead of its current market value.


This article looks at some basic stock valuation methods, the logic behind them, and how to use them to make better-informed investing decisions.


Sound good? Let’s dive in!

What Makes a Stock Valuable?


Stocks are inherently valuable because they are a share of a public company’s ownership, along with being an equity claim on the company’s cash flows.


Essentially, you own the right to receive a tiny fraction of the company’s profits when you buy a single share. If the business has a proven track record of success and is likely to exceed earning expectations tomorrow, it adds intrinsic value to that tiny share.


Furthermore, stocks are publicly traded on exchanges to get a very reliable estimate of the stock’s current market valuation. However, there is a difference between the market value of a company and its inherent or intrinsic value.

Share Prices and Stock Valuation

Share prices, and market valuation, are usually not a good indicator of the stock’s intrinsic value. Thus, when determining if a stock is overvalued or undervalued, prices are actually not very relevant at all. Further, stock prices can be affected by innumerable factors, even events like stock splits.


For example, Apple (AAPL) has been trading at around $147 per share for October 2021. To calculate the approximate market value of the company, we can simply multiply the price per share by the number of issued shares (2.46 trillion dollars, in case you were wondering).

When the company went public in December 1980, its shares were trading at $20 per share. Yet $22 invested in AAPL in 1980 would have been worth $15,200 in 2019, according to market data.


When we look at just the stock price, the two facts seem incompatible. For example, if the price of one share was $20 in 1980 and $147 in 2021, the investment value should be $147, not $15,200 in 2021.


In this case, the number of outstanding shares increased as the company gained value (using a process known as a stock split). Thus, all things kept equal, if the number of shares (supply) increases, the price (demand) will naturally decrease for each share.

So if you had 1 AAPL share in 1980 worth $22, it would have been split into many that are each worth $147 today.

Historical performance of stocks

It was borderline impossible to accurately value AAPL’s worth in 1980 when it was listed for $20 per share. It was a brand new company that could have failed just like any other business. A retail investor in 1980 could have decided to buy “cheap” stocks instead that they felt were undervalued compared to Apple. In fact, many early investors actually sold their positions on the IPO day.

It’s All About the Fundamentals

The example illustrates that stock valuation is a bit more complex than just looking at charts and stock prices. Instead, to estimate the intrinsic value of a stock, we need to look at the company’s fundamentals with the help of stock valuation methods.

Fortunately, they just sound more intimidating than they actually are.

Methods of Stock Valuation

In many ways, stock valuation is more art than science, and valuation methods are basically the brushes you’ll use to paint your masterpiece.

For someone new to the subject, the sheer number of stock valuation methods available can seem actually daunting at first.

To make things more complicated, no one method can be universally applied for all stocks. For example, using a discount model is preferable for dividend-paying stocks but might not be the right option for stocks that do not pay dividends. Thus, using the correct valuation method is extremely important when researching stocks.


There are mainly two broad categories that stock valuation methods can be classified into:




These methods rely on the company’s fundamental information like cash flows and dividend payments, publicly available on its financial statements. Examples of absolute methods include the discounted cash flow model (DCF) and the dividend discount model (DDM).




Relative methods compare the fundamental information between competing companies. By measuring the deviation from the norm, we can have an educated guess of whether the stock is undervalued or overvalued. A simple example of a relative method is comparable company analysis.


Now that we have a basic idea of what stock valuation methods are, what they are used for, and the two major categories, let’s look at some of the most popular stock valuation methods and how they work practically.

Dividend Discount Model (DDM)

The dividend discount model is a quantitative method used for predicting the price of a company’s stock. The model is based on the theory that its present-day price is worth the sum of all of its future dividend payments when discounted back to its present value.

Elevator Pitch

A stock’s intrinsic value can be determined by the sum of all its future dividend payments discounted to their present value.


To realize the gains from a stock, an investor has to sell their shares. Otherwise, they could still generate income from the stock by receiving dividends. However, if they do not plan to sell their stock and realize their gains, the only actual revenue generated by the asset would be the dividend payment.

Thus, the dividend payments generated by a share for a period of time is its inherent fair value. This method uses the present value of all future dividend payments because the value of money decreases with time due to inflation (time value of money).


The dividend discount model is not particularly useful for stocks that do not pay dividends or if the growth rate is too high.


Company A is a stable, blue-chip company with a long history of dividend payments and a steady rate of annual dividend growth at 3%. The company’s cost of equity is 7% and the next year’s dividend is estimated to be $1.69 per share. Currently, the stock is trading at $81. Is it undervalued or overvalued?

Since we have all the information at hand, we can simply plug them into the model: (1.69 / (0.07 – 0.03)) = $84.5. According to the model, the inherent value of the stock ($84.5) is higher than the market value which makes the stock undervalued based on current prices.

Discounted Cash Flow Model (DCF)

DCF is a financial modeling tool used to value a business. Simply put the DCF is a forecast of a company’s free cash flow discounted back to today’s value.

Elevator Pitch

A stock’s intrinsic value is equal to the present value of its future free cash flows.


Companies raise capital and generate income. However, since the money is borrowed, it carries a cost for the company as interest. Therefore, for a company to be profitable, it has to generate a higher rate of return on the capital through operations than the rate of interest it has to pay on that capital.


When we discount future free cash flows for a company, we’re essentially calculating their performance against a benchmark (which is the cost of capital in this case).


For example, a company takes a 10-year loan with 5% interest to fund its operations. Over the next 10 years, it has to generate enough income to cover the interest payments to break even. So its return on the capital should be at least more than 5% for it to be profitable. We find their present value by discounting the cash flows (how much they are worth today).


Once we have the present value of the future free cash flows of the company, we can find a fair valuation of the business with the help of additional information like the total cash and debt held by the company.


Not very useful for large companies with astronomical cash flows and easy access to capital with low cost.


DCF calculations can be fairly simple or extremely complex, depending on how they are modeled. Here’s a quick step-by-step process of using the DCF model on a stock:

1. Find the company’s average free cash flow (FCF) over the last three years.

2. Estimate the future free cash flows for the company.

3. Estimate the cost of capital for the company.

4. Use the following formula to arrive at the sum of total future cash flows discounted by the cost of capital:


Cash flow

Where CF is the free cash flow for the year and r is the cost of capital.

5. Add the total cash in the company’s books to the DCF and subtract the debt to arrive at the fair valuation of the company.

6. Divide the valuation by the number of outstanding shares to arrive at a fair value per share.


Let’s say Company A has $20,000,000 in cash and $8,500,000 in debt on its books. Over the next three years, the sales estimates are $1,200,000, $1,350,000, and $1,420,000. The cost of capital is 7% and the number of outstanding shares is 200,000 and the price per share is $70.

Since we already know the information required, we can just plug the numbers into the formula. Doing so, we find the DCF to be 3,459,780.59. If we add the cash and subject the debt, we get a total valuation of 14,959,780. If we divide that valuation by the number of outstanding shares, we get a fair value of $74.79 per share.

So we can ascertain confidently (at least, somewhat), that the stock is currently undervalued by the market.

Investors use many methods to value assets. Learn how mark to market is used.

Comparative Companies Analysis Explained

Comparative Companies Analysis, also known as Comps, is a relative valuation technique used to value a company by comparing that company’s valuation multiples to those of its peers.

Elevator Pitch

By comparing the key fundamental metrics of similar companies, we can find their relative value against each other.


Some key metrics tell us a lot about a company’s financial health and its value. Suppose we group several companies that operate in a similar industry or share similar characteristics. In that case, we can use these metrics to match them up against each other and judge their relative value.


It can be really hard to find companies that are truly comparable. Since this method is a relative valuation method, getting the comparison group right is vital.


A comparative companies analysis usually looks at the following metrics of the companies:

  • ☑️ Price-to-Earnings (P/E) Ratio
  • ☑️ Price-to-Book (P/B) Ratio
  • ☑️ Price-to-Earnings Growth (PEG) Ratio
  • ☑️ Dividend Yield

Price-to-Earnings and Price-to-Book ratios help us understand the market valuation of the stock against the company’s actual earnings. The PEG Ratio and Dividend Yield help us get a clearer picture of the company’s historical growth and momentum.

Together, these four metrics can be considered as the four fundamental factors of stock value, and we explore them further in-depth in the next section below.


Here’s a quick comparable companies analysis for the three large-cap tech stocks—Amazon, Apple, Google (Alphabet).

Tech stocks

There are many ways to interpret these ratios which is usually the next step. For example, we can clearly see that the P/E ratio for Amazon is much higher than the P/E ratio for the other two. While it could seem overvalued because of the high P/E, we also need to consider that it has a strong PEG ratio and the highest dividend yield.

Unlike absolute methods, it can be argued that comparative companies analysis leans much more towards art than science. In general, the strength of a comparative analysis will be highly influenced by the competency of the analyst too.

Don’t have a stockbroker yet? See the top stock trading platforms.

The 4 Fundamental Factors of Stock Value

All public companies are statutorily required to publicly disclose their financial statements, which contain vital information about the business which can be used for stock valuation. To simplify financial statements, analysts often use financial ratios to ascertain the relative value of the stock.


Unfortunately, there is no magic formula, and there are countless ratios and metrics that can be used for stock valuation based on the circumstances. However, some ratios are extremely popular and generally accepted as the most important ones. In this section, we take a deeper look at them and how they work.

Price-to-Earnings (P/E) Ratio

Earlier in this article, we noted that share prices are not really relevant for stock valuation. However, we can learn a lot about a stock by finding out the relation between the company’s earnings and the market price, and the price-to-earnings (P/E) ratio works on the same idea.


P/E Ratio = Market value per share / Earnings per share (EPS)


Finding the current market value per share is simply the process of checking the stock’s ticker on your favorite stockbroker. The earnings per share (EPS) metric can also be found for each stock on most brokers’ stock information pages.

There are usually two major types of EPS – TTM (trailing twelve months), which is the EPS over the past 12 months (trailing P/E), and the company’s forecasted EPS for the future (forward P/E).


The price-to-earnings ratio is widely used in stock valuation as it reveals the premium an investor is willing to pay on the company’s current earnings. For example, if a stock has a P/E of 10x, investors are willing to pay $10 for $1 of current earnings.


If the P/E ratio is too high, it could indicate that the stock is overvalued by the investors as the earnings might not be able to sustain the valuation. Conversely, if the P/E ratio is too low, it could mean that the stock could be undervalued relative to its earnings.


The P/E ratio also helps us compare and benchmark stocks. All things equal, the difference in the P/E ratio between two stocks can make a difference in how they are valued inherently.


Like all other metrics, it is not wise to use the P/E ratio in isolation. It should ideally be used with the different ratios to get an accurate valuation. In some cases, when a company doesn’t declare earnings or declares losses, the P/E ratio cannot be determined.

Fun fact: P/E ratio can never be negative for a company. In the event that a company has no profits or losses, the P/E ratio is “N/A.”

Price-To-Book (P/B) Ratio

The price-to-book (P/B) ratio measures the relationship between the market value of a company and its book value (tangible net assets). Unlike the price-to-earnings ratio, it is possible to ascertain the P/B ratio for loss-making companies.


P/B Ratio = Market value per share / Book value per share


The company’s book value is essentially the value that can be extracted by shutting down the company. For example, a company may own new heavy equipment while also making extremely heavy losses. If the company has to wind up, it can still sell the assets and generate some money that can be paid back to the investors.


P/B ratio, used along with other metrics like return-on-equity (ROE), can be beneficial when it comes to stock valuations. In general, a healthy growth stock should show an increase in the P/B ratio in response to a rising ROE.


However, there are several limitations with the P/B ratio too. For public companies, it can be hard to estimate a general benchmark for the P/B ratio, as it can vary from one industry to another. Therefore, it is recommended to use the P/B ratio in conjunction with other metrics and valuation methods.

Price-to-Earnings Growth (PEG) Ratio

Another metric used in stock valuation is the price-to-earnings growth (PEG) ratio. To put it simply, this ratio is derived by dividing the P/E ratio by the expected growth rate of the company’s earnings. It is used alongside the P/E ratio to get a better understanding of a stock’s value.

Here’s an example—Stock A is trading at $50, and it has an EPS of $2.40 and $1.80 over the last two years. Stock B is trading at $56, and it has an EPS of $2.80 and $1.90 in the previous two years. So which one of them is relatively overvalued?

Stock value

Stock B is relatively undervalued; the difference becomes more pronounced when using the PEG ratio instead of the P/E Ratio. So essentially, we can adjust the P/E Ratio with our projected growth using the PEG ratio.


Ideally, the PEG ratio should be under 1x for a stock to be considered undervalued. But conversely, suppose the PEG ratio is above 1x. In that case, there’s a possibility that the stock might be overvalued, with investors expecting favorable results beyond reason and paying more for the stock today than it’s really worth.

Dividend Yield

A stock’s dividend yield is the ratio of dividend payment per share and the price per share. It is usually expressed as a percentage, and it can be helpful to think of it as the interest rate you receive for holding the stock.


Of course, not all stocks pay dividends which means this metric cannot be applied to all stocks. The dividend yield can also vary massively from industry to industry. However, when it comes to dividend-paying stocks, the dividend yield must be considered during valuation.

Analyzing the company’s dividend payments can also help us find trends that indicate the company’s growth in the future.

Do you plan to use fundamental analysis to value stocks? If so, you need to learn about margin of safety.

How to Value a Growth Stock

In the examples so far, we have been looking for stocks that are undervalued by the market (also known as value stocks). While the methods listed in this article can help us understand inherent value better, they are not perfect when looking for growth stocks.


Growth stocks can actually often feel overvalued when using the traditional valuation methods. For example, most growth stocks have little to no dividends as the companies use their profits to fund expansion instead of distributing it to the shareholders.


Growth vs Value

 Fortunately, there are some solid models to identify growth stocks as well. The most famous example is CANSLIM by William O’Neil, which specifically considers all the essential aspects of a growth stock.


All in all, for the most part, growth stocks are valued based on their potential. TSLA is the most famous example of this: The company has seldom had impressive financial stats, but the fact that it’s innovating at a rapid rate—although not that profitably—made its investors believe that the stock will explode in value (which it has). This is why evaluation methods based on fundamental analysis usually don’t cut it for growth stocks.

What to Watch Out For When Evaluating a Stock

You might be tempted to fire up your trusted stock trading app and use these methods to look for the best opportunities right now, but it’s not that easy. Even the best analysts with cutting-edge valuation methods fail to watch out for the following when evaluating stocks:

Value Traps

Value traps refer to stocks that look undervalued, but they also have no potential for future growth. Looking at favorable multiples like price-to-book ratio, investors buy the stock expecting exponential growth but often end up with devastating losses.

In these stocks, the undervaluation is a confirmation of decline and not a signal for an opportunity. Taking a closer look at the companies usually reveals problems like lack of consistent profits, lack of a catalyst, and lack of interest from institutions.

Investors can stay clear of value traps by understanding the company’s context and using suitable valuation methods for the specific stock.

Inherent Market Risks

Mike Tyson once said, “everyone has a plan until they get punched in the mouth” when asked about a fight. So even though the quote doesn’t attribute directly to investing, it is still somewhat relevant.

Investors risk getting the metaphorical punch to the mouth every day by the markets. There is a meager chance of a global market crash, but when it happens, even the most promising stocks will not perform well. Factoring in the general market trends and evaluating the stock in the broader market context can also help investors prepare for black swan events.

Unorthodox Behavior

Some stocks are unique and are not bound to any rules; they defy expectations and odds and can often polarize investors. For example, a company could be trading at a level where it seems to be highly overvalued yet keeps growing every year. Therefore, it is natural to assume that not all valuation methods will always be accurate and proven wrong by outlier stocks reasonably regularly.


Looking for advanced techniques? Learn how to use the Calmar ratio.

Other Evaluation Metrics to Keep In Mind

Along with the commonly used metrics listed above, a few more metrics are used for evaluating stocks. Some of them include:

Price-to-Sales Ratio

The price-to-sales is the ratio between the market value per share and sales per share. It is very similar to the P/E ratio, except it uses just sales instead of all earnings. In some cases, like cyclical stocks, it can be used to determine the fair value when earnings might not be consistent through the years.

Debt-to-Equity Ratio

The debt-to-equity ratio lets us peek into how the company organizes its finances. It is a highly subjective ratio since the ideal benchmark will vary a lot depending on the industry and specific circumstances of the stock.

Free Cash Flow

Free cash flow is the net cash income of the company. It is an excellent metric to evaluate how effectively the company can generate cash. A company with low free cash flows might not have enough funds to meet its obligations.


Stock valuation is a complex process that requires a lot of practice. However, information is available more widely than ever, and online tools can do most of the heavy-lifting when it comes to analysis.


However, a wise investor should ideally know what values to expect and why to expect them. So now that you’ve armed yourself with these handy tools, we hope you use them responsibly.

How to Value a Stock: FAQs

Why Do Stocks Have Value?

Stocks have value because they represent an ownership share of a company and a claim to its future profits. Thus, a stock’s inherent value should be equal to the future net profits of the company at the least.

Why Do Stocks Gain or Lose Value?

Stocks gain or lose value due to market forces of supply and demand, among other things. The market value for stocks are decided by stock exchanges, and depending on investor confidence, the stock’s market value can either go up or down.

What is the Formula for Valuing a Company?

There is no universal formula for valuing a company. The correct valuation method will depend on the industry and taking into account the circumstances of the specific company.

How Do You Value a Tech Stock?

You can value a tech stock with several valuation methods. However, there are a lot of factors to consider when valuing tech stock. For example, while Microsoft and Netflix are both tech stocks, they have very different fundamentals and business approaches. When valuing tech stocks, it is imperative to consider the broader market it operates in and its specific approach.

Is It Possible to Find Growth Stocks with Valuation Methods?

It is possible to find growth stocks with valuation methods like CANSLIM. Valuation methods, at the end of the day, are just tools. They can only be as effective as the person using them.

What is the Fair Value of an ETF?

The fair value of an ETF should ideally be the fair value of the underlying assets it contains. However, since markets are constantly changing, the market value for ETFs can vary from their inherent value just like the stocks held in it.

More from MediaFeed:

Like MediaFeed’s content? Be sure to follow us.

This article originally appeared on and was syndicated by

The highest yielding monthly dividend stocks


Monthly dividend stocks have instant appeal for many income investors. Stocks that pay their dividends each month offer more frequent payouts than traditional quarterly or semi-annual dividend payers.


For this reason, we created a full list of 49 monthly dividend stocks. You can download our full Excel spreadsheet of all monthly dividend stocks (along with metrics that matter like dividend yield and payout ratio).


In addition, stocks that have high dividend yields are also attractive for income investors. With the average S&P 500 yield hovering around 1.3%, investors can generate much more income with high-yield stocks.


Screening for monthly dividend stocks that also have high dividend yields makes for an appealing combination.


This article will list the 20 highest-yielding monthly dividend stocks.




  • Dividend Yield: 6.4%

LTC Properties is a Real Estate Investment Trust, or REIT, that invests in senior housing and skilled nursing properties.


Its portfolio consists of approximately 50% senior housing and 50% skilled nursing properties. The REIT owns 177 investments in 27 states with 33 operating partners.


Just like other healthcare REITs, LTC benefits from a strong secular trend, namely the high growth of the population that is above 80 years old.


This growth results from the aging population, and the steady rise of life expectancy thanks to sustained progress in medical sciences.


In late October, LTC reported (10/28/21) financial results for the third quarter of fiscal 2021. Funds from operations (FFO) per share decreased 22% over last year’s quarter, from $0.58 to $0.45, and missed analysts’ consensus by 11 cents.


LTC Properties (LTC)


  • Dividend Yield: 6.6%

Banco Bradesco offers various banking products and financial services to individuals, corporations, and businesses in Brazil and internationally.


The company’s two main segments are banking and insurance, including checking and savings accounts, demand deposits, time deposits, as well as accident and property insurance products and investment products.


The company generates around $20 billion in annual revenues and is headquartered in Brazil.


On Nov. 4, 2021, Banco Bradesco reported its Q3 results for the period ending September 30th, 2021. Net interest income came in at $2.83 billion for the quarter, representing a 2.7% growth year–over–year. Income from insurance also grew by 2.6% to $580 million


Banco Bradesco (BBD)


  • Dividend Yield: 6.9%

Gladstone Capital is a Business Development Company, or BDC, that primarily invests in small and medium businesses.


These investments are made via a variety of equity (10% of portfolio) and debt instruments (90% of portfolio), generally with very high yields. Loan size is typically in the $7 million to $30 million range and has terms up to seven years.


Gladstone reported fourth quarter and full–year earnings on Nov. 15, 2021. The company reported total investment income during the quarter of $14.4 million, up from $13.7 million in the June quarter.


The increase was primarily due to a $0.5 million increase of interest income, driven by an increase in the average principal balance of interest–bearing investment portfolio.


Gladstone Capital


  • Dividend Yield: 7.4%

Horizon Technology Finance Corp. is a BDC that provides venture capital to small and medium–sized companies in the technology, life sciences, and healthcare–IT sectors.


The company has generated attractive risk–adjusted returns through directly originated senior secured loans and additional capital appreciation through warrants, featuring a last–nine–month annualized portfolio yield of 14.7%.


The company has exceeded the typical industry average IRR of around 10% from its loan coupons by engaging in commitment fees, guidance fees and potential equity rights, maximizing its total yield. Horizon Technology has gross investment income of around $47 million annually.


Horizon Technology


  • Dividend Yield: 7.5%

PermRock is an oil and gas royalty trust with properties in the Permian Basin. The Trust derives all its cash flows from profits from the sale of oil and natural gas production from these properties and distributes dividends monthly.


The Permian Basin is the most prolific oil producing area in the United States. The properties of PermRock consist of long–life reserves in mature, conventional oil fields, with shallow, predictable decline rates.


The trust can pump additional oil via water–flooding techniques, while it will also identify new reserves in the area in the upcoming years.


PermRock Royalty Trust


  • Dividend Yield: 7.7%

Eagle Point Income Fund (EIC) is a closed–end fund which invests primarily (75% of its assets) in junior tranches of CLO Debt.


The remaining 25% may be invested where the manager sees fit including other high yield plays like bonds, preferred issuances or CLO Equity.


More specifically, the fund intends to allocate its capital in the BB–rated tranches of CLO Debt which is typically one of the last debt tranches in the capital stack before getting to the Sub notes.


The fund’s portfolio of just over $137.8 million is comprised of 1,369 loan obligors, none of whom accounts for more than 0.91% of its total assets.


The average loan maturity of the portfolio is 4.9 years, against 2.3 years of the average remaining CLO reinvestment period. The average rating on Eagle Point’s loans is B+/B.


Eagle Point Income Fund was founded in 2018 and generates around $11 million in net investment income annually.


Eagle Point Income


  • Dividend Yield: 8.2%

Prospect Capital Corporation is BDC that provides private debt and private equity to middle–market companies in the U.S. The company focuses on direct lending to owner–operated companies, as well as sponsor–backed transactions.


Prospect invests primarily in first and second lien senior loans and mezzanine debt, with occasional equity investments. The company produces about $680 million in annual revenue.


Prospect reported first quarter earnings on Nov. 8, 2021, and results were better than expected on both the top and bottom lines.


Net investment income came to 21 cents per share, which beat estimates by $0.03 per share and represented a 40% year-over-year increase.


Prospect Capital


  • Dividend Yield: 8.2%

SLR Senior Investment is a BDC that is externally managed by Solar Capital Partners. It invests primarily in senior first lien secured loans of private, middle–market companies.


Its investment criteria include companies that generate revenues between $50 million and $1 billion, EBITDA of $15 million to $100 million, and demonstrate resilient cash flows through economic cycles.


On Nov. 3, 2021, SLR Senior Investment reported its Q3–2021 results for the period ending September 30th, 2021. Gross and net investment income (NII) came in at $7.4 million and $3.7, a decline of 6.3% and 22.9% year–over–year, respectively. The declines were attributed to the reduction in the size of the company’s income–producing portfolio.


NII/share was 15 cents vs. 54 cents during the comparable period last year. NAV/share fell quarter–over–quarter, from $15.87 to $15.73, as the company distributed more than it earned during the period.


SLR Senior Investment


  • Dividend Yield: 8.2%

Cross Timbers is an oil and gas trust (about 50/50), set up in 1991 by XTO Energy. Unit holders have a 90% net profit interest in producing properties in Texas, Oklahoma, and New Mexico; and a 75% net profit interest in working interest properties in Texas and Oklahoma.


The trust’s assets are static in that no further properties can be added. The trust has no operations but is merely a pass–through vehicle for the royalties. CRT had royalty income of $5.9 million in 2019 and $5.3 million in 2020.


In mid–November, CRT reported (11/12/20) financial results for the third quarter of fiscal 2021. Production of gas decreased 2% over last year’s quarter due to timing of cash receipts and the natural decline of the fields.


However, oil volumes grew 9% and the average realized prices of oil and gas more than doubled thanks to the ongoing recovery from the pandemic. As a result, net income per unit nearly quadrupled, from 10 cents to 38 cents.


Cross Timbers Royalty Trust (CRT)


  • Dividend Yield: 8.3%

Stellus Capital Management is BDC, that provides capital solutions to companies with $5 million to $50 million of EBITDA and does so with a variety of instruments, the majority of which are debt.


Stellus provides first lien, second lien, mezzanine, convertible debt, and equity investments to a diverse group of customers, generally at high yields, in the US and Canada.


The company was formed in 2012 and should produce about $60 million in revenue. Stellus reported third quarter earnings on Oct. 28, 2021, and results were better than expected for both revenue and profit.


Investment income for the three months total $17 million, up from $14 million in the same period a year ago, most of which was interest income from its portfolio components.


Stellus Capital


  • Dividend Yield: 8.4%

PennantPark Floating Rate Capital Ltd. is a BDC that makes secondary direct, debt, equity, and loan investments.


The fund also aims to invest through floating rate loans in private or thinly traded or small–cap, public middle market companies, equity securities, preferred stock, common stock, warrants or options received in connection with debt investments or through direct investments.


It generally invests in the United States and to a limited extent non–U.S. companies. It aims to invest in companies not rated by national rating agencies. The firm produced roughly $82.7 million in revenue in 2020.


PennantPark Floating Rate reported fourth quarter earnings on Nov. 17, 2021. Total investment income for the quarter came in at $21.6 million, down from $21.8 million in the year–ago quarter.


Meanwhile, the company invested $185.7 million during the quarter in sixteen new and eighteen existing portfolio companies with a weighted average yield on debt investments of 7.3%.


PennantPark Floating Rate


  • Dividend Yield: 8.5%

San Juan Basin Royalty Trust is a medium sized gas trust (it produces a negligible amount of oil), set up by Southland Royalty Company. The producing properties are all in northern New Mexico, in the San Juan Basin. They are currently operated by Hilcorp San Juan, L.P., which acquired the interests in 2017.


The trust’s assets are static in that no further properties can be added. The trust has no operations but is merely a pass–through vehicle for the royalties. SJT had royalty income of $8.8 million in 2020.


San Juan Basin Royalty Trust


  • Dividend Yield: 8.6%

Broadmark Realty Capital Inc. is a real estate investment trust that provides short–term, first deed of trust loans that are secured by real estate.


Customers use these loans to acquire, renovate, rehab and develop properties for both residential and commercial uses in the United States.


Broadmark Realty formed in 2010 but had its initial public offering in November of 2019. The trust has originated nearly $3 billion of loans since forming.


Broadmark Realty reported earnings results for the third quarter on 11/8/2021. Revenue grew 5.6% to $30.6 million but was $1.5 million lower than expected. Adjusted earnings–per–share of 19 cents was a penny better than the prior year.


Broadmark Realty Capital


  • Dividend Yield: 9.2%

American Finance Trust is an externally managed REIT, focusing on acquiring and managing a diversified portfolio of primarily service–oriented and traditional retail and distribution–related commercial properties.


The company’s assets consist primarily of 935 single–tenant properties net leased to investment–grade and other creditworthy tenants and a portfolio of 33 multi–tenant retail properties consisting primarily of power and lifestyle centers.


Its 968 properties comprise 20.1 million rentable square feet, which were 93.2% leased at the time of its latest 10–Q. American Finance Trust generates around $305 million in annual revenues.


American Finance Trust


  • Dividend Yield: 9.2%

Dynex Capital invests in mortgage–backed securities (MBS) on a leveraged basis in the United States. It invests in agency and non–agency MBS consisting of residential MBS, commercial MBS (CMBS), and CMBS interest–only securities.


Agency MBS have a guaranty of principal payment by an agency of the U.S. government or a U.S. government–sponsored entity, such as Fannie Mae and Freddie Mac. Non–Agency MBS have no such guaranty of payment.


The trust is structured to have internal management, which is good because it can reduce conflicts of interest and often leads to lower management expenses.


The trust reported third–quarter results on Oct. 27, 2021. Core net operating income per share came in at 54 cents, up from 51 cents sequentially. Adjusted net interest income increased to $27.7 million from $24.3 million year–over–year.


The trust also reported 5.9x in leverage as of Sept. 30, 2021, compared to 6.7x as of June 30, 2021. Book value per common share stood at $18.42 at quarter end, down from $18.75 sequentially.


Dynex Capital


  • Dividend Yield: 8.6%

American Capital Agency Corp is a mortgage real estate investment trust that invests primarily in agency mortgage–backed securities (or MBS) on a leveraged basis.


The firm’s asset portfolio is comprised of residential mortgage pass–through securities, collateralized mortgage obligations (or CMO), and non–agency MBS. Many of these are guaranteed by government–sponsored enterprises.


The majority of American Capital’s investments are fixed–rate agency MBS. Most of these are MBS with a 30–year maturity period.


American Capital derives nearly all its revenue in the form of interest income. It currently generates just over $1.3 billion in annual net revenue and trades at a market capitalization of $8.4 billion


AGNC Investment Corporation


  • Dividend Yield:9.7%

Oxford Square Capital Corp. is a BDC specializing in financing early and middle–stage businesses through loans and CLOs.


The company holds an equally split portfolio of First–Lien, Second–Lien and CLO equity assets spread across 8 industries, with the highest exposure in business services and healthcare, at 36.3% and 24.9%, respectively.


The company’s assets have a gross investment value of around $421.1 million in 61 positions, with62% of debt securities being secured.


On Oct. 26, Oxford Square reported its Q3 results for the period ended September 30th, 2021. The company generated approximately $9.8 million of total investment income, an increase of 25.6% compared to the previous quarter, or 19.5% higher on a year–over–year basis.


The growth was attributed to a larger debt and CLO equity portfolio, despite the declining rates over this period, which affected the company’s investment yields.


As a result of higher growth in investment income against growth in expenses, NII (the net investment income) amounted to $3.9 million, or 8 cents a share, 39.2% higher sequentially.


  • Dividend Yield: 10.2%

Ellington Financial Inc. acquires and manages mortgage, consumer, corporate, and other related financial assets in the United States. The company acquires and manages residential mortgage–backed securities (RMBS) backed by prime jumbo, Alt–A, manufactured housing, and subprime residential mortgage loans.


Additionally, it manages RMBS, for which the U.S. government guarantees the principal and interest payments. It also provides collateralized loan obligations, mortgage–related and non–mortgage–related derivatives, equity investments in mortgage originators and other strategic investments.


On Nov. 8, 2021, Ellington Financial reported its Q3 results for the period ending Sept. 30, 2021. Interest income came in at $36.3 million, just 0.5% lower quarter–over–quarter, while core earnings per share came in at 46 cents, 9.8% lower versus Q2–2021 due to a higher share count.


Ellington Financial


  • Dividend Yield: 11.9%

ARMOUR is a mortgage REIT that invests primarily in residential mortgage–backed securities that are guaranteed or issued by a United States government entity including Fannie Mae, Freddie Mac and Ginnie Mae.


ARMOUR reported Q3 results on Oct. 27, 2021. The trust’s liquidity including cash and unencumbered securities amounted to $790 million with $11.09 in book value per common share at quarter end. Q3 earnings per share stood at 12 cents while the debt–to–equity ratio stood at 3.6–to–1.


Meanwhile, the company reported portfolio composition was 98% agency mortgage–backed securities, including TBA securities.


Comprehensive income stood at $13.3 million, representing 5% annualized return based on stockholder’s equity at the beginning of the quarter. The company also reported $20.4 million of net interest income.


ARMOUR Residential REIT


  • Dividend Yield: 16.8%

Orchid Island Capital, Inc. is a mortgage REIT. As such, Orchid Island does not own any physical properties.


Instead, it is an externally managed REIT (by Bimini Advisors LLC) that invests in residential mortgage–backed securities (RMBS), either pass–through or structured agency RMBSs. These are financial instruments that collect cash flow based on residential loans such as mortgages, including subprime, and home–equity loans.


On Oct. 28, 2021 Orchid Island Capital reported Q3 results. Net income came in at $26.0 million and includes a net interest income of $32.6 million. Book value per share stood at $4.77, up by 60 cents sequentially from $4.71.


Orchid Island Capital


Monthly dividend stocks could be more appealing to income investors than quarterly or semi-annual dividend stocks. This is because monthly dividend stocks make 12 dividend payments per year, instead of the usual 4 or 2.


Furthermore, monthly dividend stocks with high yields above 5% are even more attractive for income investors.


The 20 stocks on this list have not been vetted for dividend safety, meaning each investor should understand the unique risk factors of each company.


That said, these 20 dividend stocks make monthly payments to shareholders, and all have high dividend yields.




If you are interested in finding high-quality dividend growth stocks suitable for long-term investment, the following Sure Dividend databases will be useful:

This article originally appeared on and was syndicated by


Liderina // istockphoto


Featured Image Credit: GaudiLab // istockphoto.