Why I Love Monthly Dividend Payers — And You Should, Too…

You’ve probably seen some of the charts and graphs illustrating the long-term wealth-creating power of dividends.

The S&P 500 has given investors a 10.2% average annual return since 1965. Nothing wrong with that. But Warren Buffett has famously chalked up 20% annualized gains at Berkshire Hathaway over the same period, for a market-crushing cumulative return of 2,810,526%.

In the process turning a modest $1,000 stake into $30+ million today.

Dividends have played a major role. It’s no coincidence that Buffett’s favorite long-term holdings are all dividend payers. I’m talking about anchor positions in timeless businesses like American Express (NYSE: Coca-Cola (NYSE: KO), Bank of America (NYSE: BAC), and Verizon Communications (NYSE: VZ).

With growing income streams from these and other holdings, Berkshire Hathaway will pocket more than $5 billion in total dividend payments this year.

The Appeal Of Monthly Dividends…

There’s nothing quite like the feeling of collecting a dividend distribution. It’s almost like a paycheck – but without any of the work. And if you have the option of reinvesting those proceeds into more shares, which in turn yield their own dividends, which then purchase more shares… even better.

You’re probably aware that most U.S. stocks pay quarterly dividends. This schedule is related to the way public companies’ financial reporting is organized: Companies report their earnings quarterly, and they pay dividends on a similar schedule.

But all things equal, if one dividend check every quarter is great, then imagine if you receive one every 30 days…

For investors, receiving monthly income is simply more convenient than receiving it quarterly (or semiannually, which is how most foreign stocks pay their dividends).

For one thing, monthly reinvestments minimize market risk — specifically, the risk of reinvesting at peak prices — and opportunities for second-guessing.

My colleague Jimmy Butts recently wrote about the virtues of dollar-cost averaging here. Well, automatically reinvesting dividends helps you do just that – and monthly dividends even more so.

Another good reason to like monthly payers is the easier decision when it comes to selling. You don’t need to wonder if you should wait months for the next dividend to be paid. With 12 payments in a year (and each one is relatively less important than a quarterly payment), the decision to sell would be easier, should it come to that.

Also, monthly payers offer big benefits to income investors, especially those who count on this income to pay bills and cover regular expenses. A lot of my subscribers over at High-Yield Investing are in this exact situation. And I love hearing about how they put those nice cushy monthly dividends to use.

Let me give you an example from our portfolio. Back in 2013, we added shares of Realty Income (NYSE: O) at just under $40 per share. This is a real estate investment trust (REIT) that owns a bunch of commercial properties around the country, with some of the biggest names in retail as tenants.

Since adding O to our portfolio, we have collected more than 100 monthly dividends totaling over $20 per share. That’s a return of 50% just from dividend payments alone – to say nothing of any appreciation in the stock (which happens to now be around $70).

Meanwhile, the dividends have continued to grow as well, increasing from $0.17 to the current $0.25 per share. That works out to an annual distribution of $3.00 per share – for a hefty yield on cost of 7.5% on my initial outlay.

Closing Thoughts

Who wouldn’t rather collect 12 dividend checks per year than four, especially knowing the power of compound interest?

Of course, it’s never a good idea to invest based on yield alone, which is why I put every High-Yield Investing candidate (regardless of dividend frequency) through a gauntlet of background checks involving balance sheet health, cash flow projections, competitive analysis, valuation, and other critical factors.

And here’s the thing… monthly dividend payers aren’t as difficult to find as you might think. Sure, you may need to do some digging. In fact, Realty Income might be a great place to start. But thus far, about a dozen have made the final cut into my portfolio – one for every month of the year.

For the first time, we’ve compiled the full list into a special report. It’s a little extra bonus report that you’ll get in addition to the “bulletproof” dividend payers I’ve been telling readers about for the past few weeks.

If you’re looking to bolster your income in 2022, I can’t think of a better place to start your search. Go here now to learn more.