If you’re interested in investing in dividends, it’s important to understand monthly dividends, in particular. Though they come with a list of advantages, they also have some drawbacks to consider as an investor. Read on to learn more about monthly dividends, their benefits and disadvantages, and popular stocks to invest in for monthly dividends.
What Is a Monthly Dividend?
Monthly dividends are dividend stocks that are paid out on a monthly basis as opposed to those distributed on a quarterly, semi-annually, or on an annual basis. This type of payment often means a more seamless stream of income for investors since they’re receiving these profit distributions more regularly.
What Are the Benefits of Investing in Monthly Dividends?
Monthly dividends come with a variety of advantages for investors. Here are some of the main benefits you receive when you make this type of investment:
- Steadier income and increased trust: Though quarterly distributions offer investors a steady stream of income, the increased frequency you get with monthly distributions can help you to better trust and rely on the company for making timely payments.
- Easier to afford monthly expenses: Since these dividends are paid out each month, they can help you afford monthly expenses such as utilities and rent more easily. In other words, they help match the frequency of portfolio income payments with the frequency of personal expenses.
- High yields: Monthly payments come with high yields for investors. Income investors, in particular, may be enticed by this benefit since it means a good source of income.
What Are the Disadvantages of Investing In Monthly Dividends?
Along with understanding the benefits that monthly dividends provide, you also need to know the drawbacks. Here are the disadvantages that come with this type of investment:
- They’re not always reliable: Since monthly dividends can be speculative, they may not be the most reliable form of dividend investing. This can be a rather large disadvantage for investors looking for a steady stream of income each month.
- Potential cash shortfall: When you have monthly dividends, payments are made more frequently. This means your management has to deal with it on a more frequent basis. If the money isn’t planned for or managed wisely, it can lead to a cash crunch.
- Higher risks: With a shorter history and high payout ratios come heightened risk levels. In addition, though monthly payments may be preferable over quarterly dividends, this may not be the case if the dividend is reduced after you invest.
Most Popular Stocks To Invest In for Monthly Dividends
If you’re just beginning your stock search, consider these popular stocks that you can invest in for monthly dividends:
- STAG Industrial.
- Shaw Communications.
- LTC Properties.
- Main Street Capital Corporation.
- Realty Income.
- TransAlta Renewables.
- Pembina Pipeline.
- Armour Residential REIT.
- Colony Credit Real Estate.
- Mesa Royalty Trust.
Now that you understand how monthly dividends differ from other dividend investments, you’re better equipped to determine if this investment and payment schedule is optimal for you. Review the benefits and drawbacks before you proceed with the investment process.