Dividends are a great way to add an income stream to a portfolio. Typically companies make dividend distributions on a quarterly basis. While a quarterly payment is the norm, it is not the only option, and in fact there are plenty of companies that make payments on other schedules, including every month.
There are two reasons why monthly dividends would be preferable to the traditional quarterly payment system used by most companies. Let's take a closer look at each reason why you may want to seek out a few stocks that pay dividends each month as opposed to on a quarterly basis.
The first reason applies to investors who use dividends as a way to cover monthly expenses. Bills come due every month, so it is easier to account for, and to plan for, our monthly bills with monthly incomes. While it is true that dollar amount of the dividend would be the same whether it came in one big quarterly payment, or three smaller monthly payments, from an accounting point of view, the use of dividends to pay monthly expenses is less complicated when the money hit your account each month.
A second and perhaps more important reason why monthly dividends are preferable comes in the form of compounding. For investors that reinvest their dividends, the power of compounding is greater if you are reinvesting your dividends more frequently.
This week we will look at a handful of companies that pay monthly dividends that investors should consider for their portfolios.
This article was originally published on MarketIntelligeneCenter.com