Are There Dividend Stocks that Payout Monthly?

Written by The Dividend Guy on March 11, 2008

Monthly Dividend Stocks

The answer is sort of. The answer really depends on what your definition of a dividend stock is. The stocks that are on a list of monthly dividend payers are not the typical dividend stocks we talk about on this blog, such as Coca-Cola’s or the Procter & Gamble. Instead, these lists are filled with assets such as exchange traded funds, real estate investment trusts, and income trusts. In my opinion and for the purposes of this blog, these assets are not dividend stocks and need to be treated differently within the context of an overall portfolio.

The easiest example to highlight why I beleive they are different is to compare it with respect to income trusts - income trusts are a completely different form of business from the corporation and do not play by the same rules with respect to tax and other financial regulations. To determine whether to invest in an income trust is very different than determining to invest in a dividend stock. An income trust’s main goal is to build a business that can sustain a high level of distributions to an investor. It does that is by purchasing income-producing assets to meet its distribution needs. A corporation on the other hand strives to build its business by growing market share, and if it does that well it can pay out its earnings to investors, hopefully making that dividend payment grow year after year as earnings increase and more and more sales are made. It is clear that these are quite different business. The same can be said for REITs and even some exchange traded funds. With this in mind, let’s look at some examples of the types of assets that distribute income monthly.

Some Examples of Assets that Provide Monthly Distributions

You will notice that in the title above I did not call these monthly dividend payments, but rather monthly distributions. This is my attempt to seperate the two income opportunities for investors - Coca-Cola is a dividend stock and Mesa is a trust. I obtained this list from a blog over at Seeking Alpha by writer Stockerblog:

RMK Multi-Sector High Income Fund (RHY)
Advantage Energy Income Fund (AAV)
Boulder Growth & Income Fund Inc. (BIF)
Neuberger Berman Real Estate Securities Income Fund Inc. (NRO)
Mesa Royalty Trust (MTR)
New America High Income Fund Inc. (HYB)
Calamos Convertible Opportunities & Income Fund (CHI)
BlackRock Municipal Income Trust (BFK)

I would suggest that with these high yield monthly distribution investments, there comes a high degree of risk. Sure you get your payments monthly, but at what price? That is why I want to discuss how these should be used in a portfolio, if at all.

Where do Monthly Dividend Payers Fit Into a Portfolio?

If you are strictly looking for income in a portfolio, then a monthly distribution can be of huge benefit. It makes the cash flow into your accounts much more regular which of course can be easier to manage and provides quicker opportunities for reinvestment or spending. However, just like dividend stocks, these monthly distribution assets carry risk and that risk must be mitigated through a properly structured asset allocation. It would be crazy (read: stupid) to place all available capital into these assets, especially those on the list above as these carry above normal risk in my opinion.

The better alternative if you were stuck on adding monthly distributions to your portfolio would be to allocate a certain (i.e. small) percentage of your overall equity portion to these types of assets and select a basket of them to reduce your risk. You would still have your other equity investments (dividend stocks) and fixed income vehicles providing you with further risk protection, while receiving these monthly distributions. Like all of investing, having too many of your eggs in one basket is not a good idea.

My recommendation would be to not focus on when you receive your dividend or distributions. The first step is designing your asset allocation and then finding the best assets to fit within this allocation. If they happen to be monthly payers then great, but I am not actively looking for them.

(Photo Credit: shadowkill)


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7 Comments so far

  1. Dividends4Life March 11, 2008 11:46 am

    Another good read! Another company worthy of mention is Realty Income Corp (O). it bills itself as the monthly dividend company. As you might guess, it is a U.S. based real estate investment trust (REIT). It is currently yielding over 7%. I have owned it since 2006 and it has steadily increased its dividend during that period, but previously had a slip in 2003. Based on the criteria I use today, I would not initiate a position in it.

    Best Wishes,
    D4L

  2. Credit Recovery » Blog Archive » Are There Dividend Stocks that Payout Monthly? March 11, 2008 11:56 am

    […] Jack Bog’s Blog just wrote an article aboutHere’s a preview of it: […]

  3. Dividend growth investor March 11, 2008 12:06 pm

    Some of my earliest dividend plays were high-yield bond closed end funds, trading on NYSE. Do not be fooled by the idea of monthly income and high initial yield. These stocks are some of the most consistent dividend cutters out there.
    I have been burned there :-(
    http://dividendgrowth.blogspot.com/2008/02/number-one-reason-why-i-dont-chase-high.html

  4. Bernie Klunder March 11, 2008 5:26 pm

    Shaw Communications Inc (SJR.B) is a pretty decent Canadian dividend growth stock that pays monthly.

  5. Ed March 12, 2008 1:35 pm

    It would be possible to stagger the dividend producing stocks to be “monthly” if their quarterly dividend payments were rotating.

  6. Weekly Dividend Investing Roundup - March 28, 2008 » The Dividend Guy Blog March 28, 2008 6:57 am

    […] The Skilled Investor hosted the Carnival of Financial Planning and included my article on Are There Dividend Stocks that Payout Monthly? […]

  7. Dividend growth investor March 28, 2008 2:51 pm

    Actually if you invest in all of the dividend aristocrats or high-yield dividend aristocrats, you would be able to create a portfolio which will pay you monthly dividends. In addition, your total dividend income will be increasing every month.. Pretty cool..

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