Who couldn’t use some extra money flowing into their bank account on a regular basis? If that seems like a nice idea, dividend stocks are the way to go. A dividend is an amount of a company’s earnings that gets issued to its shareholders, often on a quarterly basis. Stocks that pay monthly dividends are not as common as stocks that pay dividends quarterly, but the more frequent dividend payment is attractive if you want a regular source of additional income.
Understanding the benefits of stocks that pay monthly dividends
Dividends are paid by profitable companies, so it stands to reason that dividend-paying stocks are some of the most desirable stock investments in the market. Dividends are generally a sign of a high-quality company, and that can give investors a reason for confidence because dividends cannot be faked; they are only paid when positive net earnings are made.
Although cash payments are common with dividends, some companies offer the dividend in other forms of company equity, like additional stock, property, mutual funds, or exchange traded funds (ETFs).
Though most dividend stocks pay their dividends quarterly, or sometimes yearly, the company’s board of directors may decide that a monthly schedule is more appropriate. The board is in charge of the specific payments associated with the dividend, as well as the time frame in which the dividend payments are made, and the payout rate. Special dividends can be paid as well. These non-recurring dividends usually happen due to a specific period of strong business performance.
Finding dividend paying stocks to invest in for greater profits
Savvy investors look for dividend-paying stocks because they recognize the added value within these stocks. Some of the most well-established companies that trade publicly on the stock market pay dividends. When an investor buys shares of these companies, they are investing in a company with a history of success that may be more likely to continue its success.
There are some industries and stock types to start with when looking for dividend-paying companies to invest in, while other types of companies are unlikely to pay dividends. For instance, start-up companies, penny stocks, or some high-growth companies probably don’t pay dividends because operating costs are higher than their profit margins. Many young companies that fit this description put their profits back into the company, investing in growth by funding research and development or business expansion.
Finding dividend-paying stocks is easier when you look for well-established companies with a history of making dividend payments to shareholders. Oftentimes these types of companies can be found in specific industries, like utilities, banks and financial institutions, consumer goods, and the healthcare industry.
Don’t miss these dates if you want to receive dividend payments
Dividends are paid on a schedule, and if you’re seeking dividend payments, you’ll need to know those dates. These dates help shareholders determine their eligibility for a dividend payment and following the dates and actions accordingly will lead the investor to receive a dividend payment. The first date to know is the Announcement Date.
The Announcement Date is when the company’s management announces that a dividend will be paid to shareholders. The shareholders must then approve of this payment.
The Ex-Dividend Date is the next date of importance in the chronology of dividend payments. This date determines when the dividend eligibility expires. This date is also known as the ex-date. For instance, if an ex-date is June 3, investors who bought the stock before that date are eligible to receive the dividend payment. However, if an investor purchased the stock on June 4, that investor would not be eligible for the dividend.
The next date to know for dividend payments is the Record Date, which sets the cut-off date for those eligible to receive the dividend payment. The Payment Date is the final noteworthy date, and it is when the company pays the dividend to the eligible shareholders.
Find stocks that pay monthly dividends and you will be investing in some of the market’s most secure investments that will benefit you through monthly income.
What characteristics do you look for in dividend-paying stocks before investing?