These Dividend Stocks Pay You Early and Often

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What's better than getting paid to invest? Getting paid more often.

With bonds and bank accounts paying you next to nothing on your money right now, many investors are discovering the value of strong dividend-paying stocks. With yields that in many cases exceed what you can get on fixed-income investments, dividend stocks have been the best answer for income-hungry investors willing to take on risk.

But from a cash flow perspective, dividend stocks present some challenges. The nice thing about safe investments like bank CDs and bond funds is that most of them let you receive income payments every month. That fits well with the way most people budget their money. With most dividend stocks, you'll only get paid once every three months -- and some make you wait even longer before you can get that hard-earned income.

Is there a better way? Fortunately for investors, there is.

12 months, 12 dividends
Some companies have recognized that their shareholders don't want to wait for their dividends. So rather than just blindly sticking with tradition, they've chosen to pay dividends every month. If you're used to getting monthly bills, getting a monthly pension check, and paying off your credit card every month, seeing dividends come into your brokerage accounts is the perfect fit.

Unfortunately, you won't find many megacap blue-chip stocks among those making monthly payments. Paying dividends 12 times a year incurs more cost for companies, and especially for widely held stocks with millions upon millions of shareholders, making multiple payments is burdensome.

Where you will typically find monthly dividends, though, is in a few special niches of the market. Let's take a look at three of them.

1. Royalty trusts
Royalty trusts are typically involved in developing natural resources, such as oil and gas or mining. Their profit streams are defined by the commodities they produce and the prevailing prices for those products on the open market. And because of tax rules, royalty trusts typically pay out the vast bulk of their profits in the form of dividends.

With both oil and metals prices at high levels, royalty trust investors have seen some excellent yields lately. And many of those with attractive yields -- Hugoton Royalty Trust (NYSE: HGT  ) , San Juan Basin Royalty Trust (NYSE: SJT  ) , and Permian Basin Royalty Trust (NYSE: PBT  ) all yield more than 6% -- make monthly payments.

You won't get identical monthly payments -- the amounts vary depending on market prices and production levels. But payment levels are relatively consistent, making it possible to predict with some accuracy how much you'll get paid.

2. Real estate investment trusts
If you've ever paid rent, you know that real estate typically runs on a monthly cycle. So it would make intuitive sense that if a REIT collects income every month, it should pay it out every month.

As it turns out, though, most REITs don't do that. But a couple, such as Realty Income Corp. (NYSE: O  ) and Inland Real Estate (NYSE: IRC  ) , make monthly payments. And with yields between 5% and 7%, those REITs pay you enough income to make it worth your while.

3. Odds and ends
Outside of REITs and energy-related trusts and limited partnerships, you'll only find the occasional stock paying monthly dividends. Gold mining company Goldcorp (NYSE: GG  ) , for instance, makes monthly payments even though its annual dividend amounts to less than a 1% yield. Cable TV operator Shaw Communications (NYSE: SJR  ) also pays a monthly dividend, and its 4.5% yield holds up well against much bigger telecom and cable players.

Get paid when you want
It may seem silly to consider making investments based on how frequently a stock pays dividends to its shareholders. But if getting a monthly dividend makes your financial life simpler and easier, then as long as you can find quality companies that will be able to earn enough profits in the future to keep your income stream going, then there's no reason not to look at companies like these.

Meanwhile, if you're a fan of dividend stocks, be sure to check out the Fool's free report listing 13 high-yielding dividend stocks we recommend. They won't all give you monthly dividends, but they'll still get you the income you need.

Tune in every Monday and Wednesday for Dan's columns on retirement, investing, and personal finance.

Fool contributor Dan Caplinger loves the feel of a smooth dividend check, no matter how big it is. He doesn't own shares of the companies mentioned in this article. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy encourages you to vote early and often.

Read/Post Comments (3) | Recommend This Article (12)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 09, 2011, at 3:51 PM, Seano67 wrote:

    PSEC also pays a monthly dividend in the BDC sector.

  • Report this Comment On June 10, 2011, at 10:47 AM, busterbuddy wrote:

    Very good article. Dividends should be at the core of your investments, at least 50%. All these mentioned are good. Monthly is important and why a balanced fund can't pay out dividends monthly puzzles me. I believe in the future better products are needed. There are a few ETFs preferred stock funds that pay out monthly, PFF and PGF. I highly recommend "O". They now have a dividend reinvestment plan setup at wells fargo. As for HGT, it is primarily Natural gas play. And I"m not seeing dividend yields to match your figures but I think it is a good investment. I prefer, SBR versus the ones you mentioned. I've found it to yield a little better. Thanks

  • Report this Comment On June 10, 2011, at 10:50 AM, busterbuddy wrote:

    Related to REITs. They are falling in price and will continue to fall. But I believe it is speculation that drive the market. The market is rigid and it is very hard to maintain a sound investment position. Way to much option playing and with little money hedge funds and investment banks have rigid the game. The only way to play is to hold money and wait for down turns. We have the beginning of a down turn.

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