The monthly mindset is gaining ground

It’s easy to set our sights on a single stock and think, “That’s the one. That investment right there is going to make me rich.”

And most of us have sighed over current market success stories, imagining where we would be if we’d only invested in them at their dirt-cheap onsets.

But the truth is that successful investing is rarely about making a single brilliant decision. Instead, it’s about making consistently wise small decisions that compound over time.

I brought this subject up last week in “Turn dividends into a lifetime income machine.” Writing how, “I’m a big believer in the power of compounding,” I acknowledged that:

It’s like getting healthy. You don’t lose weight by going to the gym once – even if you bench the highest set of weights there. It takes consistency to get where you want to be.

The more often you commit to a regular (intelligent) schedule, the more positive results you’ll see.

That same “more is more” principle applies to dividend-paying stocks, and not just in terms of reinvesting them over time, as I wrote about last week. It’s also a matter of how much more they offer when you get them more frequently.

That’s why I’ve always appreciated companies that pay monthly dividends. You might technically be getting the same amount as under a quarterly payout system.

However, monthly income offers undeniable benefits that make it superior in almost every single way.

I detailed one of the biggest reasons why monthly dividends are so valuable in my “lifetime income machine” article. When you find a strong stock that keeps paying you:

And when those dividends are coming in on a monthly rather than a quarterly basis, you have more opportunities to make that cycle work for you.

That benefit obviously applies to people planning for retirement. But there are benefits for retirees as well that I didn’t cover in my last article.

Most of us pay bills on a monthly basis, whether mortgages, rent, utilities, insurance, or credit cards. Getting dividend checks more frequently helps us to cover all those burdens more smoothly instead of having to budget several months in advance.

That might seem like a little thing; but in these complicated times, it can make an enormous financial difference.

It can also make a huge psychological difference for everyone, retiree or not. Monthly dividends can offer the kind of peace of mind that keeps investors calm and rational even when volatility hits.

They’re getting 12 reminders a year that their holdings are, indeed, holding up just fine. In which case, there’s less urge to panic-sell – one of the worst market mistakes investors can make.

Panic-selling means not only exiting a position at a lower price point. It also means losing out on quality stocks’ almost inevitable rebound. And, worse yet, you’re ending your compounding journey on very unfavorable terms.

If monthly dividend checks can reduce that tendency – and they can – then I’m all for them.

One of the most recognizable monthly dividend companies in the world is Realty Income (O). It’s hard to miss what it does when it literally coined itself as “The Monthly Dividend Company.”

A real estate investment trust (REIT), Realty Income has been faithfully paying its investors 12 times a year for decades. And it’s been thriving all the while.

Perhaps that success story is what inspired Agree Realty (ADC) to implement a similar program back a few years ago. Other REITs that pay every month include:

Main Street Capital (MAIN) does the same over in the business development company (BDC) sector. But even so, the list is clearly pretty short… for now, that is.

Companies that are already consistently making quarterly payouts – and raising them on an annual basis – are automatically excellent candidates for a monthly dividend program. That list includes:

Each one is a high-quality REIT with a strong reputation for dividend growth, balance sheet discipline, and long-term shareholder alignment. So all they need is a nudge (or two) in the right direction.

Many of my readers know I’ve been lobbying for REITs to pay monthly dividends for a while. As I’ve explained to dozens of CEOs, there’s only a modest cost involved. It’s mainly backend admin costs and banking fees – the latter of which are negligible compared to the dividend outlay.

The benefits, on the other hand, more than compensate for those charges. When a company makes the switch, it signals extreme confidence in its ability to cover its dividends year in and year out.

Twelve payouts per year instead of four implies the business in question has highly predictable, consistent cash flows, after all. This automatically puts REITs and other dividend-paying companies in the direct and very flattering spotlight for income-focused investors.

Retirees, people planning for retirement, and income funds all understand how monthly payouts allow them to participate in dividend reinvestment plans (DRIPs) that make their jobs easier and more effective.

In short, these businesses expand their potential investor base right off the bat when they move away from the standard quarterly model. It’s a win-win for everyone involved.

That’s why I’m confident we’ll see more income stocks take the “Realty Income route” going forward. And in the meantime, we’ll value the ones already giving us what we want.

Happy SWAN Investing!

Brad Thomas
Editor, The Wide Moat Daily

Big tech companies are dominating the headlines as they drive the S&P 500 higher and higher still.

It begs a lot of questions, including and especially ones about sustainability.

That’s why Nick Ward and I tackled the topic in last week’s Wide Moat Show, reviewing the real numbers, data, and – yes – potential in this fast-growing market.

Catch the full episode right here.