In a nutshell, monthly dividend stocks refer to stocks that pay off dividends every month. If you already invest in dividends or income, you should know by now that the majority of dividend-paying stocks out there pay their investors on a quarterly basis, so these monthly stocks might be completely new to you.
The first primary trait of monthly dividend stocks would be that, although they get traded as single stocks on normal stock exchanges and online discount brokers can buy them and sell them, the ones who invest in their income-producing asset portfolios are actually holding companies, REITs, trusts, closed-end funds or master-limited partnerships. This is mostly what sets monthly stocks apart from quarterly stocks, which individual companies usually invest in.
Since the majority of monthly dividend stocks out there get money from a lot of different sources, they tend to have diverse streams of income by nature. This means that they can make their cash dividend payouts every month less risky compared to the dividends that individual companies give out.
Take GE, for example. Despite being a financially solid, widely-held company with many analysts, this big conglomerate stock had to cut its dividend down by 68% in early 2009. Plus, this cut was made during a time when most people believed that GE would have no trouble maintaining its quarterly payouts to its investors.
So, if you happen to be an income investor and are planning to invest in monthly dividend stocks sometime soon, then you have to make sure you do enough research on the various stocks, bonds and other assets out there first that can actually produce good income for your choice of stock. If your stock only invests in a single industry, like oil producers, then your dividend payment might drop if the prices of oil drop, too – along with the prices of your monthly stocks. Remember that.
On the other hand, if you are an investor looking for consistent dividend timing within your portfolio, then there is one kind of monthly stock that you need to take special heed of: Canadian Energy Royalty Trusts. Although these stocks give out monthly dividend payments, the Canadian investment laws have changed quite recently.
Basically, these investments will now be taxed as normal corporations in Canada. This means that the yields will drop because parts of it will have to be paid out in the form of taxes every month to the Canadian government. You also need to remember that the Canadian government now withholds 15% of dividend payments to American investors as non-residents withholding tax. However, American investors have the right to apply for partial refunds for these taxes if they choose to.
Now you know all there is to know about monthly dividend stocks. Basically, if you are interested in dividend investing and steady income streams, then monthly stocks might suit your investment portfolio really well. However, you will still need to do a lot of research before you start investing in stocks like this – remember that.