Monthly dividend stocks and ETFs

Why most dividends are quarterly

In the United States, most companies pay dividends four times a year. Companies in many other countries pay twice a year or once. A small group pays monthly, and they are mostly structured around steady, rent-like or interest-like income:

• Real estate investment trusts (REITs). Some collect rent and pass it on every month. Realty Income is a well-known example.
• Business development companies and income funds. These hold loans or income-producing assets and distribute the income monthly.
• Bond and income ETFs. Funds that hold bonds, or that sell options to generate income, often distribute monthly.

Is monthly better than quarterly?

Not by itself. What matters is the total amount you receive over a year, not how often it arrives. A 4% yield paid in four instalments is the same income as a 4% yield paid monthly.

What monthly payments really give you:

• Smoother cash flow. It is easier to match monthly bills with monthly income.
• Slightly faster reinvestment. Receiving cash sooner means you can buy more shares sooner, though the compounding effect is small.

What they do not give you:

• Higher returns. The payment schedule has no effect on how profitable the investment is.
• Safety. Many monthly payers offer high yields, and a high yield can be a warning. See our guide to yield traps.

Things to watch with monthly payers

• Where the yield comes from. Some funds pay out more than they earn, returning part of your own capital. Check whether the distribution is covered by income.
• Taxes. Distributions from REITs, funds and bond income can be taxed differently from ordinary company dividends. Rules vary by country.
• Fees and structure. Income ETFs can have higher costs, and some give up growth to produce a high payout.
• Concentration. Many monthly payers sit in the same few sectors, such as real estate and lending, so they can fall together.

Build a monthly paycheque from quarterly payers

You do not need monthly payers to get monthly income. Companies pay on one of three typical quarterly cycles:

If you hold a few companies from each cycle, a payment lands every month. Pay months differ from company to company and can change, so always check each company’s declared schedule. For a step-by-step approach, read how to create monthly dividend income.

How to estimate your monthly income

Use the portfolio income calculator to add your holdings and see the monthly average, and the dividend calculator for a single position. Both show an average per month, even when your real payments arrive in larger quarterly lumps.