Dividend stocks typically pay a dividend every three months. But that doesn't mean you have to settle for quarterly payments. If you invest in stocks that are on different payment schedules, that can ensure you have more frequent cash flow.
Three stocks that together can generate regular, monthly income for your portfolio are Merck & Co. (MRK 0.37%), Royal Bank of Canada (RY 0.49%), and Camping World Holdings (CWH 1.90%).
1. Merck & Co
Merck is a top drug manufacturer with one of the best-selling products in the healthcare industry, Keytruda. The cancer drug is in danger of losing exclusivity later this decade but the company is working on a new formulation (that involves injecting it under the skin) that could extend some patent protection until 2040.
Overall, the company's business is solid, with Merck generating $15.2 billion in free cash flow over the trailing 12 months, which is more than double what it has paid out in dividends during that time ($6.9 billion). Positive results combined with news that its personal cancer vaccine with Moderna was demonstrating effectiveness in a phase 2 trial has helped send Merck's stock soaring in recent months.
The stock's 2.6% dividend yield is above the S&P 500 average of 1.8% and looks incredibly safe right now, with a payout ratio of less than 50%. Merck normally makes its dividend payments every January, April, July, and October.
Trading at 15 times its future earnings (based on analyst expectations), the stock is also a relatively cheap buy -- the S&P 500 average is 17.
2. Royal Bank of Canada
The most valuable company on the Toronto Stock Exchange is Royal Bank of Canada (RBC). The top bank is among the safest Canadian-based businesses to invest in there. It enjoys strong, consistent financials, making it an ideal option for dividend investors.
In its most recent fiscal year (ended Oct. 31), revenue of just under 49 billion Canadian dollars was down just 1.4% from the previous year even though macroeconomic conditions have worsened during that time and interest rates have been rising.
In terms of cash flow, the dividend is well supported by Royal Bank's free cash flow of CA$19.4 billion in the last fiscal year (its dividend payments totaled less than CA$7 billion). It has been paying a dividend since 1870, leaving little doubt that it will continue to do so for the foreseeable future.
At a 4.1% yield, RBC stock offers investors a relatively generous dividend. The bank pays its dividend every February, May, August, and November. It's also trading at 11 times its future profits, making it another good value buy.
3. Camping World Holdings
The downturn in the markets this year has delivered a gem to dividend investors: Camping World Holdings. At first glance, its 11.3% yield looks like it may be too high for the recreational vehicle company. Things have slowed down for its business; Camping World's sales of $1.9 billion for the period ended Sept. 30 declined 3% from the prior-year period.
But with the company's payout ratio still fairly low at around 50% of earnings, the dividend doesn't look to be in any imminent danger. And even if things got worse and management did have to reduce the payout, it could still remain highest on this list.
Camping World is focusing on tightening expenditures in the wake of weakening demand, and that should help strengthen its financials and add more resiliency to the business. And that's why I remain invested in the business and bullish on its prospects, as Camping World's financials still look strong.
The company makes dividend payments every March, June, September, and December. Together with the other stocks on this list, it can provide you with a dividend payment every month next year. With the shares trading at a forward price-to-earnings multiple of less than 6, investors are getting a deeply discounted stock that also pays a generous dividend.
