Saturday, September 17, 2011

The Benefits of Monthly Dividend Stocks

Would you like your capital returned faster, and have your compounding happen more quickly? How about less volatility? You can get all that from monthly dividend stocks. According to the database list at, there are almost 200 different companies that pay dividends monthly, many of which have fairly high yields. Although these investments are often referred to as stocks, that term is used loosely. These investments are real estate investment trusts, oil income trusts, closed end bond funds, and closed end income stock funds, which pay dividends every month.

The Advent Claymore Convertible Securities & Income Fund (AVK) sports a yield of 6.0%, sells at about a 3% discount to net asset value, and carries a 0.92% management fee. This closed end fund, founded in 2003, invests approximately 60% of its portfolio in convertible securities and 40% in lower-grade non-convertible income securities.

Another example is Gas Natural Inc. (EGAS), previously called Energy, Inc., It is a distributor of natural gas in Montana, Wyoming, North Carolina, and Maine. It was founded in 1909. The stock pays a yield of 5.0% and sports a forward price to earnings ratio of 13.

If you think that real estate is due for a refund, you might want to take a look at LMP Real Estate Income Fund Inc. (RIT). It is an exchange traded fund that invests in real estate related companies including real estate investment trusts. It sports a yield of 4.4%, and has paid dividends since 2002. It is trading at a slight discount to net asset value. The management fee is 0.61%.

The MFS Multimarket Income Trust (MMT) pays a yield of 7.9%. The stock trades at a 6% discount to net asset value. The company, which has been around since 1987, has a management fee of 0.85%.

Pengrowth Energy Trust (PGH) is a Canadian oil royalty income trust that yields 8.3%. the company was founded in 1988. The company explores, develops, and produces oil and natural gas reserves in western Canada.

Realty Income Corp. (O), one of the few stocks with a single letter stock ticker symbol, yields 5.0%. This real estate investment trust which specializes in commercial retail real estate, has been around since 1969. The stock trades at 16.3 times forward earnings.

The monthly dividend investments you should avoid are:
1. the ones with high management fees
2. the ones with limited liquidity and which trade very few shares each day
3. the ones that trade at a premium to net asset value
4. the ones using excessive leverage
5. for municipal bond closed end funds, beware of the Alternative Minimum Tax

To see the list of almost a couple hundred monthly dividend stocks, including many that have yields of 6% or more, go to Remember, very high yields may not be sustainable.

Disclosure: Author did not own any of the above at the time the article was written.


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