Hello, I am a person who looks for stocks with great dividends paid by fairly stable companies. Recently I was made aware that some companies pay monthly dividends instead of quarterly dividends. Is there any reason to believe that a company that does this is somehow a little more risky than the traditional quarterly dividend pay out that most companies do? I am willing to take on a little risk, but I'm not real familiar with the "low down" on any risks of monthly vs. quarterly dividends. Any input would be greatly appreciated.
No, it's not more risky at all. Whether the company pays out their dividend once a year, 4 times a year or 12 times a year it really is just a cosmetic change. $12 once a year or $1 per month doesn't really make any difference. Keep in mind that compound interest does favour companies that pay out their earnings sooner rather than later. Risk from dividends is best assessed by looking at the cashflow, debt levels and most importantly the payout ratio. I own several companies that pay out monthly. As you can notice most of these companies are types which generate a steady income & cashflow that doesn't really bounce much from one month to the next.
In the grand scheme of things, I doubt it matters that much, unless you're investing large chunks of money. Companies may want to pay dividend monthly for many different reasons, and yes, it could be something shady, but I think if a company's shady, then they'll be shady even if they pay out quarterly dividends.
I agree that it's not very important, unless the dividends are high and we are needing money in the short term, in that case it's convenient to have them monthly.
It's not important in reality, as they tend to be companies / limited partnerships that are designed to do so. The only risk that I'm aware of is if you're a foreign investor trying to buy listed limited partnerships through your private bank, which in some cases are prohibited - I can't remember the mechanics behind it but certain foreign banks have issues with the liability element of these companies.
I would not say that it is risky. Honestly, most companies that do monthly dividends rather than quarterly dividends are seemingly more stable with their cash flow. It really does not matter whether or not they pay monthly or quarterly because, like mentioned above, $1 per month or $12 a year is still the same amount of money.
Thanks everyone. It's good to know that my wanting to get my dividends ASAP rather than waiting quarterly is not going to hurt me! Everyone is different, some are looking for growth but I look for dividends. As long as the price of the stock hasn't fluctuated that much in the past 5 years and the company seems stable on other points, I like the idea of having a monthly (interest) added to my income. With regular interest rates so AWFUL, it's hard to find ways to beat inflation.
I have a very similar mindset. If this is a very longterm plan also take a good hard look at dividend aristocrats, nothing beats having that dividend going up each year. Also bonds do exactly what you described and the fluctuation in price is meaningless if you do not sell before maturity. However keep in mind that if you are investing with long time goals it doesn't hurt to have small positions in more risky growth companies.
Yep, pretty much. When having a considerable amount of capital to invest, diversification is the key so that last suggestion you make is a good one.
I have never invested in a company that does monthly and I think it is a small minority that would. Just curious can someone throw out an example, I want to see how it is reported on financial sites.
