Most Investors Get This Wrong About Monthly Dividend Stocks
The thought of getting dividends every month is undeniably mouthwatering, but when it comes to investing in monthly paying dividend stocks, there's something you should know...
While most companies pay dividends on a quarterly basis, many investors are under the impression that getting more frequent, monthly payouts will supercharge the growth of their portfolio. The truth is, though, the payment frequency really doesn't matter and a monthly payment schedule is nothing more than a marketing gimmick.
And yes, as much as I love Realty Income (O), who has trademarked itself as "The Monthly Dividend Company," the fact that it pays a monthly dividend doesn't make it a better buy (says the guy who, ironically, bought a couple shares this week).
Over time, assuming all other variables are the same, you will end up with a nearly identical portfolio value and annual dividend income no matter whether your cash-flow comes in every month or every quarter.
To test this for yourself, use this free dividend calculator, and see what happens (or doesn't) when you keep all variables the same and change only the distribution frequency.
The reality is that the frequency of dividends is not the determining factor in building wealth, nor does it give you any calculable advantage. The only thing you should concern yourself with is the quality and performance of the assets themselves.
Don't let the promise of a monthly dividend cloud your judgment when it comes to building your portfolio. While receiving income at that pace is undoubtedly appealing, it should not be included in your investment thesis, especially when you consider that many of the monthly payers out there are actually pretty subpar (as evidenced in this video here).
That's not to say they're all bad, though. You just need to analyze each investment with a holistic point of view.
With that in mind, which monthly paying stocks do you have in your portfolio? Write to me here and let me know.
And a big thank you to the 20 readers who responded last week. You rock! 🙌
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If you're on the hunt for the perfect dividend portfolio, your search ends here! In this video, we delve into a market beating, 10-stock portfolio that not only boast a high dividend yield but also offers substantial dividend growth.
Believe it or not, a high-yield approach can actually result in less dividend income 20-30 years down the road compared to the alternative approach that I tell you about in this video.
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"I am currently struggling with the question: Should I only invest in ETFs? As some ETFs offer a great dividend yield and are extremely diversified, why would one invest in single stocks?"
- Catarina | Email Submission
Investing exclusively in ETFs is likely the best strategy if you'd prefer a more automated, hands-off approach.
With that said, some investors have fun researching individual stocks and enjoy the process of personally curating their portfolio. While this is definitely less passive than ETFs, for many, it's an enjoyable hobby that adds a personal touch to their investment strategy.
Ultimately, you have to find what works for you. At the end of the day, the best investment strategy is the one you can stick to.
Have a question? Ask me here to see it featured in an upcoming newsletter.
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