The Benefits of Monthly Dividend Stocks

Investing in monthly dividend stocks has increased in popularity over the years. Many are familiar with stocks that pay a dividend every quarter, but monthly dividends are new to many investors. Here are some of the benefits of investing in monthly dividend stocks. 

More Frequent Payments

The vast majority of dividend stocks pay out once a year or once a quarter. When you get a monthly dividend stock, you will, of course, be receiving 8 more payments a year than if you received quarterly dividends. If you are trying to create a residual source of income, this can be a very valuable asset to your portfolio. Just for owning shares of stock, you will be able to receive a steady stream of income. 

Faster Compounding

Another big advantage of receiving monthly dividends is the faster compounding that comes with it. When you get a dividend, you can immediately reinvest it into more shares of stock. This will strengthen your portfolio by increasing the number of shares that you own. Over time, the value of the stocks will potentially rise, and you could realize a nice overall return on your investment. Then in the short-term, you are buying more shares of monthly dividend stocks. Your monthly dividend payment is calculated on a per-share basis. Therefore, the more shares that you own in the company, the bigger your monthly dividend payment is. As you get a bigger dividend payment, you can buy even more shares the next month and so on. It has a snowball effect. This is a more rapid way to build up your investment portfolio than are many other methods. 

Less Volatility

By investing in monthly dividend stocks, you will generally be subject to less volatility as compared to buying other stocks. Companies that offer monthly dividends are traditionally set up differently from your normal corporation. Many of them are holding companies, trusts and REITs. Therefore, they have an entire portfolio of assets and income streams to bring in revenue. This diversification can provide them a steady stream of income regardless of the economy or other outside factors. Traditional corporations rely heavily on one method of income and, therefore, can be greatly affected by a bad economy. 

When this happens to a traditional company, they may have to cut back on the dividend or eliminate it completely. In addition to that, you could experience wild swings in the price of the stock in the company. With monthly dividend stocks, the stock price tends to remain pretty level and constant. It will generally increase over time and provide you with a nice return on your investment. As it grows, you receive a steady dividend payment every single month to use as you wish. 

blog comments powered by Disqus
Scottrade