Top UK Monthly Dividend Stocks of 2024

There are many different types of stocks that UK investors can choose from today. Income stocks — those that provide shareholders with an income through regular dividends — is one specific category. 

Dividends are never guaranteed and depend on a company’s profits and balance sheet strength. But many shares listed on the London Stock Exchange intend to make a dividend payment to their shareholders. This is the reward they offer individuals for investing in them.

Most income stocks make these payments every three, six, or 12 months. But there are a handful of UK shares that hand out dividends on a monthly basis. And those stocks can be an excellent source of income.

How do monthly dividend stocks work?

A monthly dividend stock simply chooses to pay a dividend more regularly to their shareholders. But note that the frequency with which they make dividend payments doesn’t translate into higher returns. This is a mistake that some new investors can make.

Let’s consider the case of Company A. This income stock can choose to pay a £1 dividend to its shareholders twice a year, or it can choose to reward investors semi-annually and to dish out two £6 payments. 

Either way, the company will make a total dividend payment of £12. The return is exactly the same. The only thing an income investor needs to consider is how often they wish to receive their cash.

Investors can use a company’s online resources to learn how often they pay dividends. This information can be found in the dividend history section of a firm’s corporate website, for example, or in a company’s annual report.

What UK companies pay monthly dividends?

Investors only have a small selection of monthly dividend stocks to choose from in the UK. There are around 2,000 companies currently listed on the London stock market. Yet only 20-30 of these pay dividends out each month.

The lion’s share of UK stocks that pay monthly dividends are real estate companies, investment trusts, and exchange-traded funds (ETFs).

Property businesses usually receive their rents every four weeks or so, and therefore have the capacity to distribute dividends at the same frequency. This is the same for an investment trust that is focussed on the real estate market. These are known as real estate investment trusts (REITs).

Top UK monthly dividend stocks

Let’s look at five monthly dividend stocks that UK investors can buy today.

Balanced Commercial Property Trust

The Balanced Commercial Property Trust has been going since 2005 and concentrates on the British commercial property market. It is listed on the FTSE 250 index and holds total assets worth around £1.3bn.

Since 2019 it has been registered as a REIT. This obliges it to pay a minimum of 90% of annual earnings out in the form of dividends. 

The trust’s portfolio is chiefly geared towards the industrial and office property sectors. The remainder is split across retail (including retail parks), residential, leisure, and student accommodation.

The Balanced Commercial Property Trust is also focused mainly on London and the South East of England. Collectively, these regions account for more than half of the total portfolio.

Rents tend to be higher in these regions and capital appreciation can be stronger, thanks to the South-East’s higher affluence rates versus the rest of the UK.

TwentyFour Select Monthly Income Fund 

The TwentyFour Select Monthly Income Fund is a closed-ended investment fund. This sort of mutual fund issues a set number of shares at the time of its initial public offering (IPO). They are also actively managed, unlike open-ended mutual funds.

A major difference between closed and open-ended is the use of leverage. Funds like TwentyFour Select Monthly Income can use leverage to purchase assets. On one hand, this can boost long-term returns. But investors need to be aware that taking on debt also increases the risk they face.

This particular fund is focused on acquiring fixed income credit securities in the UK and Europe. Its portfolio comprises a mix of corporate bonds, asset-backed securities, high-yield bonds, bank capital, Additional Tier 1 securities, leveraged loans, and payment-in-kind notes.

Financial instruments with a higher chance of default offer better interest rates. However, such investments also raise the potential for the fund to endure big losses.

Ediston Property Investment Company

Retail parks are the focus for Ediston Property Investment Company. In fact, the company has sought to rebalance its portfolio following the Covid-19 outbreak and in 2022 sold all its office and leisure assets to focus on large retail spaces. 

Today the business — which is also classified as a REIT — owns 11 retail park assets.

Ediston believes the out-of-town retail park segment will grow strongly in the post-pandemic environment. Such properties provide a less cramped shopping experience for consumers and can be easily reached by car. 

Footfall is also rising as retail warehouses benefit from the steady growth of e-commerce, and more specifically the emergence of click-and-collect. This model is rising in popularity as people can get their orders more quickly and at their convenience. 

Larger retail assets are especially well suited to this ‘omnichannel’ model because of their large storage capabilities versus other ‘bricks and mortar’ sites.

Caspian Sunrise

Oil and gas producer Caspian Sunrise is a relatively new player when it comes to monthly dividends. The company announced its maiden dividend in November 2022, which it paid out the following month.

The business — which is listed on London’s Alternative Investment Market (AIM) — is focused on producing oil and gas in Kazakhstan. Its flagship asset is the BNG project where it has been developing both shallow and deep structures. 

Caspian Sunrise owns a 99% stake in BNG and production there is soaring thanks to contributions from new wells. Total output increased 81% in the six months to June 2022, to 414,048 barrels of oil per day.

Profits at commodities producers are of course highly sensitive to prices of the raw materials they produce. And Caspian Sunrise has been boosted by higher crude prices following Russia’s invasion of Ukraine.

The long-term future of oil exploration and production may not be as lucrative as renewable energy demand grows. So this AIM share has plans to diversify into wind energy and recently reported having identified a location.

JPMorgan USD Emerging Markets Sovereign Bond UCITS

As its name implies, the JPMorgan USD Emerging Markets Sovereign Bond UCITS ETF is an ETF. These financial instruments are bought and sold on stock exchanges and are baskets made up of certain securities. Such funds can hold assets like shares, bonds, commodities, and currencies.

A major advantage for investors is that these funds spread risk by holding a variety of different securities. However, their complexity means that they can be hard to understand for new investors.

This ETF from JP Morgan operates a portfolio of government and quasi-government bonds across developing markets. At the last count in December 2022, its portfolio held 415 different holdings.

The JPMorgan USD Emerging Markets Sovereign Bond UCITS has a truly global focus. Turkey, Brazil, South Africa, and Indonesia are all among its top 10 holdings. 

Investment vehicles like this offer individuals the chance to capitalise on fast-growing markets. However, the political and economic landscape in emerging nations can also be volatile. Government bonds are less risky than corporate bonds, but they can still expose investors to higher risk than bonds from developed countries.

Are monthly dividend stocks safe?

UK shares that pay monthly dividends aren’t necessarily more or less safe that those that distribute cash on a quarterly or six-month basis.

Investors still need to carry out the same checks as they would on any other dividend-paying stock. For example, ensure that predicted dividends are well covered by anticipated earnings (dividend coverage of two times and above provides a wide margin of safety). Selecting stocks with strong balance sheets and robust cash flows is also important. 

Are monthly dividend stocks a good investment?

The obvious advantage of selecting monthly dividend stocks is that an income investor doesn’t have to wait to receive their payout.

This can be especially important for those who depend on dividend income for everyday living. For example, it can make budgeting easier as an individual can expect a cheque every four weeks or so.

Prioritising monthly dividend stocks can also be useful for individuals looking to reinvest their money. Frequent dividends mean they are more likely to have cash on hand to seize on an investment opportunity. 

What’s more, the sooner an investor receives their dividend, the more quickly they can reinvest it and get their money working for them. In other words, a monthly dividend will boost someone’s long-term wealth thanks to the beauty of compounding.

One final advantage of monthly dividend stocks is that investors don’t have to hold onto a share for too long just to receive their payout. This has an obvious advantage if, for example, an individual needs to raise capital or if they suspect a bear market could be on its way. They can be a great investment if your priorities align with the benefits above. Be sure to evaluate your personal investing goals before you make your decision.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.