Here’s how to find the best stocks that pay monthly dividends (or quarterly or annually)

Top stocks that pay monthly dividends (or for that matter quarterly or annually) are great additions to a portfolio. Here’s how to find them

Growth dividend stocks are a unique type of investment that can deliver strong earnings quarter after quarter—and yet at the same time pay dividends.

We feel that growth dividend stocks that pay monthly dividends (or for that matter, quarterly or annually) can be an important part of your portfolio if they have strong business models and sound balance sheets.

Note that monthly payments are typically made by REITs and former income trusts—most stocks pay quarterly. The monthly income typically appeals to retirees looking for more frequent payouts.


When to trust your dividends

“One of the best ways to judge whether a company will keep paying its dividend, or even increase it, is the dividend payout ratio. This simply measures what portion of a company’s earnings are allotted to paying dividends. If a company keeps its payout ratio fairly steady, say at 7% of earnings, and its earnings grow…”
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 Stocks that pay monthly dividends (or quarterly or annually): Take advantage of high growth investing opportunities for greater gains

 There are some high growth dividend stocks that offer yields that are as high—or even higher—than yields on more-established companies.

Still, you need to focus more than ever on quality when it comes to finding the best high growth dividend stocks to add to your portfolio.

As with conservative dividend-paying stocks, high growth dividend stocks offer investors a measure of security. Dividends, after all, are much more stable than earnings projections. More important, dividends are impossible to fake—either the company has the cash to pay them or it doesn’t.

However, it’s important to avoid judging a company based solely on its dividend yield (the percentage you get when you divide a company’s current yearly payment by its share price).

That’s because a high yield can sometimes be a danger sign rather than a bargain. For example, a dividend stock’s yield could be high simply because its share price has dropped sharply in anticipation of a dividend cut.

As well, you should always remember that more aggressive growth stocks may hold the potential for greater gains than conservative selections, but expose you to a higher level of risk. That’s whether or not they currently pay dividends.

It’s why we recommend that you look beyond dividend yield when making investments in high growth dividend stocks, and look for dividend stocks that have also established a business and have at least some history of building revenue and cash flow.

Remember the following characteristics of the top stocks that pay monthly dividends (or quarterly or annually) and you can boost your portfolio returns

The top dividend-paying stocks to invest in have strong positions in healthy industries. They also rely on strong management to make the right moves to keep them competitive in changing marketplaces.

The top dividend-paying stocks have the following characteristics:

  • They provide regular income
  • They are one of the dominant firms in an industry
  • They feature hidden assets
  • They are on high-quality, proven companies
  • They operate a well-established business
  • They have strong management
  • They have manageable debt

Above all, for a true measure of stability, focus on stocks that pay a dividend they’ve maintained or raised during economic or stock-market downturns. That’s because these firms leave themselves enough room to handle periods of earnings volatility. By continually rewarding investors, and retaining enough cash to finance their businesses, they also provide an attractive mix of safety, income and growth.

A track record of dividend payments is a strong sign of reliability and a sound indication that investing in the stock will be profitable for you in the future. 

Always use our three-part Successful Investor approach while investing in stocks that pay monthly dividends, and you can profit more over the long term

First, invest mainly in well-established companies. When the market goes into a lengthy downturn, these stocks generally keep paying their dividends, and they are typically among the first to recover when conditions improve.

Second, spread your money out across most if not all of the five main economic sectors (Manufacturing & Industry; Resources & Commodities; Consumer; Finance; and Utilities). This helps you avoid excess exposure to any one segment of the market that is headed for trouble. This will also dampen your portfolio’s volatility in the long term.

Third, avoid or downplay stocks in the broker/media limelight. That limelight tends to raise investor expectations to excessive levels. When companies fail to live up to expectations, these stocks can plunge.

Bonus tip: Understand the key points of a balance sheet to make better stock picks

A balance sheet is a financial statement that gives a snapshot of a company’s assets, liabilities and shareholders’ equity. Investors use this data to determine how sound a company’s finances are—and also to discover if it has any “hidden assets.” 

Certain types of assets on a balance sheet might have actual market values well above historical values. For example, when a company buys real estate, the purchase price goes on its balance sheet as the historical value of the asset. Over a period of years or decades, the market value of that real estate may climb substantially. But the purchase price remains unchanged on the balance sheet. You have to look closely to spot this kind of hidden value. 

Dividend policy has many implications for businesses offering a dividend. How do you think companies should handle profit distribution to positively impact stock price?

Do you find it appealing for stocks to pay monthly dividends, or do you feel that distracts from a focus on the quality of the stock?

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