Saturday, December 10, 2011

Monthly Dividends Can Reduce Volatility and Increase Compounding

Monthly dividend investments can return your capital faster, and can provide faster compounding. The monthly payments can also reduce volatility. Fortunately, there are over 150 different stocks that pay dividends monthly. Actually, even though these investments are often referred to as stocks, they are technically closed end bond funds, real estate investment trusts, oil income trusts, and closed end income stock funds, which pay dividends every month.

These monthly dividend investments can be found at, which lists almost 200 different companies that pay dividends monthly, over 60 of which have high yields in excess of 7%.

One 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 4.9% and sports a price to earnings ratio of 13.5.

The MFS Multimarket Income Trust (MMT) pays a yield of 9.5%. It invests in fixed in fixed income investments throughout the world. The stock trades at a 5.2% discount to net asset value. The company, which has been around since 1987, has a management fee of 0.82%.

The Advent Claymore Convertible Securities & Income Fund (AVK) sports a yield of 6.6%, sells at about a 11.4% 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.

LMP Real Estate Income Fund Inc. (RIT) is a way of investing in real estate and receive monthly inocme. It is an exchange traded fund that invests in real estate related companies including real estate investment trusts. It carries a yield of 4.5%, and has paid dividends since 2002. It is trading at a slight discount to net asset value. The management fee is 1.02%.

Pengrowth Energy Trust (PGH) is a Canadian oil royalty income trust that yields 7.6%. 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 5.1%. This real estate investment trust which specializes in commercial retail real estate, has been around since 1969. The stock trades at 16.2 times forward earnings.

When looking for monthly dividend investments investors should avoid investments with high management fees, limited liquidity, ones that trade at a premium to net asset value, and the ones using excessive leverage. The municipal bond closed end funds may trigger 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 Keep in mind that 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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