The $55,000 ‘Retirement Salary’ Portfolio: Too Good to Be True?

What’s better than monthly dividends that add up to 7.2% to 15.4% yearly yields?

Cheap monthlies thanks to a high level of fear amongst vanilla investors.

Source: CNN Fear & Greed Index

We contrarians do our heavy shopping when the crowd is fearful. We have some attractive dividend opportunities today in quarterly payers.

But hey, why settle for every 90-day divvies when we can get paid on the month, every month?

Monthly dividend stocks pay us on the same schedule we receive our bills, which is convenient no matter our age but downright helpful once we hit retirement.

But when it comes to explaining the difference, I find a visual really helps the message sink in.

Let’s look at a $500,000 portfolio split evenly among a group of five mega-cap dividend payers. We’ll find each of these popular blue chips in the top 10 or 20 holdings of almost every large-cap fund—and they not only deliver a skimpy sub-1% yield, but they deliver it in fits and starts!

Four of Those Monthly Checks Are Barely $100!

Source: Income Calendar

Now, here’s what it looks like if you took that same amount and socked it into the 5 monthly dividends I plan on looking at today. Not only do they yield substantially more—11% on average!—but look at how smooth and predictable that income is:

It’s Like Pulling in a Retirement Paycheck

Source: Income Calendar

But I can’t emphasize this enough: Monthly dividend stocks don’t get a pass just because they pay us more often. Just like there are lousy quarterly payers, there are lousy monthly payers. So as much as it’s easy to get lured in by a shiny dividend that’s 3x, 4x, even 5x what the blue-chip indexes are doling out, we don’t want to invest our hard-earned savings in companies that will rug-pull shareholders after just a couple of years.

With that in mind, let’s get into the nitty gritty and see whether these high-paying monthly dividend stocks and funds are also high in quality.

1. EPR Properties (EPR)

Dividend Yield: 7.2%

I’ll start with a couple of monthly yielders in the real estate investment trust (REIT) space, which also happens to be some of the most generous yields in the sector.

EPR Properties (NYSE:) is the ultimate “experiential” REIT. Its roughly 350-property portfolio is filled with what people want to do: theatres, ski resorts, TopGolf driving ranges, casinos, and even museums and private schools.

COVID gutted the stock (and forced the REIT to briefly suspend its payout before bringing it back to roughly two-thirds of its pre-COVID levels), but a return to more normal activity, as well as leaner Fed rates, have helped EPR claw back most of its lost ground.

Meanwhile, a previous liability for EPR is becoming an asset once more. Theatres were particularly hard-hit during COVID-19, and EPR has been working to reduce its exposure somewhat. However, theatres still account for 36% of adjusted EBITDA, so it can still capture some of the rebound in theatres as Americans return to the movies. That’s good because North America’s box-office gross is expected to improve by double digits in 2025, while AMC’s master lease is slated to increase by 7.5% this year.

EPR lifted its monthly dividend in 2024—modestly, sure, but that’s an improvement from leaving it untouched in 2023. Meanwhile, even after its latest run higher, EPR shares trade a little above 9 times “funds from operations as adjusted” (FFOAA), which is just the company’s slightly altered terminology for adjusted funds from operations (AFFO).

IS EPR on the Right Track?

2. Ellington Financial (EFC)

Dividend Yield: 12.4%

Of course, the highest dividends you’ll find in the real estate world aren’t in equity REITs, but mortgage REITs (mREITs)—companies that own “paper” real estate such as mortgages, mortgage-backed securities (MBSs) and more.

Ellington Financial (NYSE:) will invest in almost anything under the sun. Broadly speaking, its assets are split into three pools, but those pools contain a world of different holdings:

• Credit (78%): Residential transition loans, residential mortgage loans, commercial mortgage loans, commercial MBSs (CMBSs), collateralized loan obligations (CLOs), debt and equity investments in loan origination entities, and more.
• Longbridge (12%): The company’s reverse mortgage arm, which includes proprietary reverse mortgage loans, unsecuritized HUD FHA Reverse Mortgages for Seniors (HECMs), and more.
• Agency (10%): Agency MBSes are issued or guaranteed by government agencies such as Fannie Mae (OTC:), Freddie Mac (OTC:) and Ginnie Mae. These securities tend to have less credit risk than traditional instruments. However, Ellington is rapidly pulling away from these securities, which make up 10% of the portfolio—down from 25% a year ago! The last time I looked at EFC, the company had reduced this part of the portfolio by almost a third, to 12%, and it’s a couple percentage points less today.

There’s nothing wrong with agency debt—Ellington’s management is simply moving with the environment, instead choosing to pour more resources into home equity lines of credit (HELOC) and second-lien loans.

Ellington’s dividend is simultaneously its most frustrating and attractive trait. This is a 12%-plus monthly distribution—but one that has been cut numerous times in the past, including a 13% haircut in 2024, to 13 cents per share. At least in the near future, EFC’s dividend coverage looks healthier, thanks in part because of the stability Longbridge provides. And EFC is a cheap stock in a cheap industry, trading at just 7.5 times 2025 earnings estimates.

A Great Dividend—If You Can Hold On To It

3. PIMCO High Income Fund (PHK)

Distribution Rate: 11.8%

Closed-end funds (CEFs) are another venue for eye-popping amounts of income.

Take PIMCO High Income Fund (NYSE:), a fund from one of the market’s top debt specialists.

PIMCO trusts a three-manager team to run a dynamic asset allocation strategy with very few guardrails. PHK can’t invest more than 25% of assets in non-USD securities, nor can it invest more than 40% of total assets in securities from emerging-market issuers. Past that, management can basically go anywhere.

Right now, the portfolio favors high-yield debt at roughly 30% of assets, U.S. government debt (14%), emerging markets (11%), non-agency mortgage (10%), and non-USD developed market debt (10%), with smatterings of investment-grade credit, MBSs, munis, and more.

In the long term, PIMCO has done what PIMCO does: outperform. But despite not being hyper-aggressive with debt leverage (just 15%), that performance comes with sharp peaks and valleys.

This Bond Fund Isn’t for the Faint of Heart

Pullbacks have typically been a good time to consider PHK more closely—but while the fund is trading at a smaller premium (5%) than it has averaged over the past five years (7.5%), we are still paying $1.05 for every in assets.

4. Abrdn Income Credit Strategies Fund (ACP)

Distribution Rate: 15.4%

We can get an even higher rate from a more focused global corporate junk fund, Abrdn Income Credit Strategies Fund (NYSE:). Roughly a third of assets are invested in U.S. high-yield, with the remaining portfolio scattered across the U.K., Luxembourg, Germany and other nations.

Maturities are in line with comparable index funds—80% in 0- to 5-years, and most of the rest in 5- to 10-years. Credit quality is junkier, however, with 60% of assets in B-rated bonds and 21% in CCC-rated debt. Leverage has been on the upswing of late, at about 25% vs. 15% less than a month ago.

I’ve said about ACP previously, “ACP can be useful over shorter time periods. Currently, this CEF might be nearing one of those useful inflection points, as its discount to NAV has widened to about 9%—well above its five-year average discount of just 1%.” Well, in a short period of time, that window has started to close, with the discount narrowing to about 6%.

Also worth noting: a sharply smaller distribution. Abrdn sets ACP’s distribution well in advance, and it recently announced the payout would shrink from 10 cents monthly to 7.75 cents, effective January 2025. ACP yields 15%+ regardless, but it’s a change worth noting—and the second distribution rollback since 2020.

When ACP Last Cut Its Distribution, Prices Weren’t Far Behind

5. Nuveen Municipal Credit Opportunities Fund (NMCO)

Distribution Rate: 7.6% / 12.1% (tax-equivalent)

Don’t be fooled by this “meager” single-digit yield.

Nuveen Municipal Credit Opportunities Fund (NYSE:)) is a municipal bond fund, meaning its distributions are exempt from federal (and possibly state and even local taxes) for most folks. For anyone in the top tax bracket, that 7.6% headline yield equates to a 12.1% tax-equivalent yield from federal tax savings alone!

Nuveen is a massive buyer of bonds—it manages nearly $430 billion worth right now. So when municipalities issue bonds, they call in the big whale, and Nuveen throws its purse around to secure the best deals for its investors.

While municipals are a relatively secure area of the market, Nuveen is taking chances in NMCO, which holds low- to medium-quality munis that are rated BBB or lower at the time the bonds are bought. Management does have a couple lower bars to meet—it won’t allocate more than 30% of assets to munis rated CCC+ or lower, nor more than 10% of assets in defaulted securities or securities of issuers in bankruptcy or insolvency proceedings. On top of that, Nuveen layers an aggressive 40%-plus in debt leverage to make the most out of its bets.

Seatbelts Are Required to Ride, However

As big swings are the norm, timing is key. For now, NMCO trades at a decent 6% discount to NAV, which is a little wider than its five-year average of 5%. But not by much.

Disclosure: Brett Owens and Michael Foster are contrarian income investors who look for undervalued stocks/funds across the U.S. markets. Click here to learn how to profit from their strategies in the latest report, “7 Great Dividend Growth Stocks for a Secure Retirement.”