If the past few weeks is a sign of what might be coming to Wall Street, investors should get ready for a volatile 2022. In light of jittery markets and rising inflation, many investors are increasingly looking at passive income opportunities. Therefore, today I’ll discuss the seven best monthly dividend stocks for 2022.

At present, the  S&P 500 index offers an annual dividend yield of 1.29% which is close to a multi-year low. Therefore, market participants searching for steady income need to be selective in terms of market segments and shares to find juicy yields.

Among the top-yielding sectors are real estate investment trusts (REITs), many of which pay monthly dividends, as opposed to quarterly dividends offered by most other stocks. In addition, a number of business development companies (BDCs), closed-end funds, exchange-traded funds (ETFs), and master limited partnerships (MLPs) also pay monthly dividends. Investors can also diversify their dividend portfolios into other stocks and funds so that they get regular monthly dividend checks.

With that said, here is our list of best monthly dividend stocks that should generate a reliable stream of income for long-term investors in 2022:

• Agree Realty (NYSE:ADC)
• Dynex Capital (NYSE:DX)
• iShares Fallen Angels USD Bond ETF (NASDAQ:FALN)
• iShares Preferred and Income Securities ETF (NASDAQ:PFF)
• Main Street Capital (NYSE:MAIN)
• Realty Income (NYSE:O)
• Stag Industrial (NYSE:STAG)

Best Monthly Dividend Stocks: Agree Realty (ADC)

52-week range: $61.27 – $75.95

Dividend yield: 4%

Bloomfield Hills, Michigan-based Agree Realty is a well-known retail REIT that owns free-standing retail properties. Clients include 24 Hour Fitness, 7-Eleven, Wawa, and PetSmart, among others.

ADC released third-quarter results on Nov. 1. The company generated a net income of $36.4 million, or 52 cents per diluted share, up from $21.3 million, or 39 cents per diluted share, in the prior-year quarter. Core funds from operations (FFO) increased 44% year-over-year (YOY) to $64 million. Adjusted Funds From Operations (AFFO) increased 42% YOY to $62.1 million.

On the results, chief executive officer Joey Agree remarked, “Our focus on best-in-class retail net lease opportunities has served to construct a leading portfolio with nearly 14% of annualized base rents derived from ground leases and 67% via investment grade tenants.”

Agree Realty is focused on properties leased to essential retailers such as grocery stores and drug stores. Therefore, it could be less likely to be a broad economic downturn. Its tenants are responsible for building insurance, maintenance, and real estate taxes. The REIT boasts Best Buy (NYSE:BBY), Tractor Supply (NASDAQ:TSCO), and Costco (NASDAQ:COST) among its tenants.

In 2021, the company switched from a quarterly payout schedule to a monthly one. It has increased its dividend at a 5% compounded annual rate over the past decade. ADC stock currently yields 4%.

ADC stock hovers around $67 per share, up around 2% YTD. From a valuation standpoint, shares currently look expensive at 13.5 times trailing sales. Interested readers could regard a potential decline toward the $65 level or even below as a better entry point. The 12-month median price forecast for Agree Realty is $80.

Dynex Capital (DX)

52-week range: $15.32 – $20.51

Dividend Yield: 9.6%

Richmond, Virginia-based Dynex Capital is a mortgage REIT (mREIT) that primarily invests in residential and commercial mortgage-backed securities. Agency residential mortgage-backed securities account for roughly 85% of its portfolio.

Dynex released Q3 results in late October. Net income came in at $3 million, or 9 cents per share, compared to a net loss of $31.4 million, or 98 cents per share, in the prior quarter. Earnings available for distribution increased 3 cents from the previous quarter to 54 cents per common share.

On the results, CEO Bryon Boston cited, “We are pleased to once again have generated returns in excess of our dividend in the quarter. Our quarterly and year-to-date total economic return is 0.3% and 2.7%, respectively.”

DX primarily invests in mortgage-related securities, including federally guaranteed loans through Fannie Mae and Freddie Mac. Regular InvestorPlace.com readers would remember that the mortgage REIT sector came under great stress in the early part of the pandemic in 2020.  Analysts point out that there could be further volatility when the Federal Reserve begins to raise interest rates in 2022.

The company has delivered 13-cent dividends every month to shareholders this year. DX stock is slightly above $16, down 6% this year.

Shares are trading at around 8.5 times forward earnings and 3.3 times trailing sales. A decline back to about $15 would improve the margin of safety. The 12-month median price forecast for Dynex Capital stands at $18.

Best Monthly Dividend Stocks: Shares Fallen Angels USD Bond ETF (FALN)

52-week range: $28.66 – $30.44

Dividend Yield: 3.4%

Expense ratio: 0.25% per year

Our next discussion centers around an exchange-traded fund (ETF), the iShares Fallen Angels USD ETF. It gives access to high-yield bonds that have recently lost their investment grade rating. The fund was first listed in June 2016

FALN, which has 355 holdings, tracks the Bloomberg US High Yield Fallen Angel 3% Capped Index. The leading 10 names make up about a third of net assets of $4.9 billion.

In terms of sectors, we see energy (23.73%) followed by consumer cyclical (16.71%) and communications (11.21%). Among the top names on the roster are Occidental Petroleum (NYSE:OXY), Apache (NASDAQ:APA), Freeport-McMoRan (NYSE:FCX), Kraft Heinz (NASDAQ:KHC) and Western Midstream Partners (NYSE:WES).

The ETF is up close to 2% in the past 52 weeks, and the dividend yield stands at 3.8%. Those investors in search of monthly yields should research the fund further. 

iShares Preferred and Income Securities ETF (PFF)

52-week range: $37.04 – $39.64

Dividend Yield: 4.5%

Expense ratio: 0.46% per year

Our next choice is another ETF, namely the iShares Preferred and Income Securities ETF. This fund invests in preferred shares, which have characteristics of bonds and common stocks. It started trading in March 2007.

PFF, which has 503 holdings, tracks the Ice Exchange-Listed Preferred & Hybrid Securities Index. The top 10 names make up about 14% of net assets of about $20 billion.

In terms of sectors, we see financial institutions (61.14%) followed by industrials (24.29%), and utility (13.65%). Leading holdings include Broadcom  (NASDAQ:AVGO), Wells Fargo (NYSE: WFC), Danaher (NYSE:DHR), Bank of America (NYSE:BAC) and ArcelorMittal (NYSE:MT).

The fund returned close to 1% so farin 2021, and the current price supports a dividend yield of over 4.4%. PFF could appeal to a range of readers searching for monthly passive income.

Best Monthly Dividend Stocks: Main Street Capital (MAIN)

52-week range: $30.82 – $47.13

Dividend Yield: 6%

Houston, Texas-based Main Street Capital provides debt and equity financing to lower middle-market companies. As a BDC, it mainly invests in distressed firms that need financing.

Main Street Capital released Q3 results in early November. Total investment income increased 48% YOY to $76.8 million. Net increase in net assets derived from operations came in at $84 million, or $1.22 per share. Distributable net investment income stood at $52.2 million, or 76 cents per share. Cash and equivalents ended the quarter at $59.6 million.

On the results, CEO Dwayne L. Hyzak remarked, “The third quarter represented another quarter of sequential growth in total investment income and included another record level of dividend income from our portfolio equity investments.”

Main Street is highly regarded for employing a high due diligence standard regarding portfolio businesses. Therefore, loans have low probability of default. Thanks to a broader economic recovery, MAIN stock has seen its price surge above its pre-pandemic highs. It is currently at $42 per share, up over 30% YTD.

Shares are trading at 16.8 times forward earnings and 7.6 times trailing sales. Interested readers could consider buying around $40. The 12-month median price forecast for Main Street Capital is $45.

Realty Income (O)

52 week range: $55.23 – $72.29

Dividend yield: 4.4%

With around 7,000 properties, the San Diego, California-based Realty Income is one of the largest REITs worldwide. It focuses on high-traffic retail properties.

Realty Income announced Q3 results in early November. Revenue increased 22% YOY to $492 million. Net income came in at $135 million, or 34 cents per diluted share, up from $23 million, or 7 cents per diluted share, in the prior-year quarter. Normalized FFO per share surged 8.5% YOY to 89 cents, while AFFO per share increased 12% YOY to 91 cents.

The REIT has recently announced the completion of its previously announced merger with its peer VEREIT. In addition, it has spun-off its office assets into a new, publicly traded REIT, named Orion Office REIT (NYSE:ONL).

On the metrics, CEO Sumit Roy remarked, “We are pleased to announce the completion of our merger with VEREIT, strengthening our position as the leading net lease REIT and global consolidator of the net lease space.”

As a Dividend Aristocrat, Realty Income boasts hundreds of months of dividend payments. The REIT went as far as trademarking “The Monthly Dividend Company” as its official nickname. O stock yields 4.4% at the current price level.

Realty Income trades at $68, up 13% in 2021. However, shares do not look cheap at almost 40 times forward earnings and 13.8 times trailing sales. The 12-month median price forecast for O stock is $79.

Best Monthly Dividend Stocks: Stag Industrial (STAG)

52-week range: $29.40 – $45.98

Dividend Yield: 3.22%

Boston, Massachusetts-based Stag Industrial is a REIT focused on owning single-tenant industrial real estate such as warehouses and light industrial properties stateside. It owns over 500 warehouses as well 100 million square feet of leasing space.

Stag Industrial released Q3 results in late October. The company generated a net income of $48.4 million, or 30 cents per diluted share, compared to $22.4 million, or 15 cents per diluted share, a year ago. Core FFO stood at $88.1 million, up from $70.7 million in the prior-year quarter. In addition, cash available for distribution increased 32% YOY to $72.4 million.

After the announcement, CEO Ben Butcher cited, “STAG showcased the rare ability to drive acquisition volume while maintaining pricing discipline.” And: “This combined with continued internal growth resulted in exceptional Core FFO per share growth in the third quarter.”

Wall Street highlights that STAG is well-positioned to profit from a rising e-commerce adoption as witnessed during the pandemic. For instance, its largest tenant, Amazon (NASDAQ:AMZN), accounts for close to 5% of total rental income.

Meanwhile, due to supply chain issues, many companies are investing in domestic manufacturing capabilities. Therefore, the demand for industrial real estate is also on the rise.

STAG is one of the top monthly dividend stocks to buy, with a yield of 3.2%. It hovers at $45, up 44% YTD. Shares are trading at 12.9 times trailing sales. The 12-month median price forecast for the stock is $47.50.

On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Tezcan Gecgil, Ph.D., has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all three levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.