Monthly Dividends

[daat99]

I'm intrigued by the prospects of owning companies which pay monthly dividends.

I wanted to know what your thoughts on this subjects are.

Do you have any monthly dividend paying companies in your portfolios?

What do you consider the cons/pros of such a stock?

[Dividend Watcher]

I don't look at payment schedule. What matters to me is the ability of the company to grow and the ability and commitment to pay an increasing dividend.

Monthly vs. quarterly payments only nets you a small increase in compounded return and that's only if you reinvest the proceeds. Without reinvestment, you're left with company performance and the dividend yield.

That being said, if you're using the income to fund current expenses such as during retirement, it helps with budgeting and levels the cash flow stream but you can do that in other ways. I do own Realty Income (O) but not for its dividend schedule.

[EricL]

Some stocks that I own are Realty Income (O) and American Realty Capital Properties (ARCP).

Linn Co. (LNCO) is another that pays monthly.

[Dividend Watcher]

Shaw Communications (SJR) also pays monthly, IIRC.

[daat99]

Thanks for all the replies.

I looked at O myself but the PE of 50 started a "not a chance" reaction in my brain

ARCP was something that came across one of my filters but I noticed it reduced dividends during February just to increase them again to the same level in March.
I also couldn't find any data on it prior to 2011 so that is a bit new company as well.

LNCO looks too new for me to consider as a DGI stock (I could find dividend data from 2012 only).

SJR looks attractive (PE wise) but their erratic dividend schedule will trigger my "sell when dividends are reduced" rule too fast (I counted 3 reductions between 2014 and 2012 and then I just stopped counting them).


With all that aside, do you consider any of the monthly paying stocks to be a valid stock for a long term DGI portfolio?
Is there any real benefit (with the exception of reinvesting every month instead of every quarter) to holding those (or others)?

[ChadR]

Since O is a REIT, you should look at FFO instead of PE when doing your research. That is what I do. I never look at PE when I'm evaluating REITs.

Don't remember ARCP reducing dividends in Feb, but I'm not positive on that and I will need to look into it further.

[EricL]

(07-17-2014, 04:15 PM)ChadR Wrote: Since O is a REIT, you should look at FFO instead of PE when doing your research. That is what I do. I never look at PE when I'm evaluating REITs.

Don't remember ARCP reducing dividends in Feb, but I'm not positive on that and I will need to look into it further.

I believe ARCP had an extra return of capital "dividend" in February. Its normal payout has not been cut to my knowledge.

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(07-17-2014, 03:47 PM)daat99 Wrote: With all that aside, do you consider any of the monthly paying stocks to be a valid stock for a long term DGI portfolio?

Is there any real benefit (with the exception of reinvesting every month instead of every quarter) to holding those (or others)?

I own O and ARCP in "dividend growth" portfolios.

I used to own LNCO but sold it last year when there were concerns about its accounting and dividend coverage. Since then it seem to have stabilized and may be worth considering. The parent company, Linn Energy (LINE) has a good streak of steady to increasing dividends.

There is a very, very slight benefit to compounding monthly rather than quarterly, but its not a significant enough benefit to chose one over the other solely for that reason.

[Dividend Watcher]

(07-17-2014, 03:47 PM)daat99 Wrote: SJR looks attractive (PE wise) but their erratic dividend schedule will trigger my "sell when dividends are reduced" rule too fast (I counted 3 reductions between 2014 and 2012 and then I just stopped counting them).

Shaw is a Canadian company also listed on the American exchanges. The fluctuations are due to currency translation. My Canadian banks do the same thing. Over longer periods of time, it will average out but you have to be patient. Ten years ago US$1=CAD$1.50 or so. Today they are close to par (US$1=CAD$1). It will bounce between the 2 extremes. Go to their IR website and see what they list as the declared dividend in Canadian currency.

I should also add that there's no tax withheld if your holding is in a qualified retirement account such as an IRA. If it's in a taxable account, taxes will be withheld. Also, make sure your broker doesn't withhold them regardless of the tax treaties. I've heard some brokerages take the lazy way out and withhold regardless.

[daat99]

Thank you very much for all the helpful insights.

I have no idea what FFO is (yet), I'll read on it more and check the REITs using it for the future purchases.

Good point about the currency fluctuations, I didn't even consider that.
I'll look into it again.

As for taxes:
My account is an IRA account with W8BEN filled so I shouldn't pay taxes.
From what I understand though the US company deduct taxes from the dividends regardless of the tax treaty.
Several brokerage firms gave me the same answer so either all the brokers I can open an account with are lazy (meaning I'm stuck with them) or the tax treaty doesn't cover the dividends

[cannew]

(07-17-2014, 08:43 AM)Dividend Watcher Wrote: I don't look at payment schedule. What matters to me is the ability of the company to grow and the ability and commitment to pay an increasing dividend.

Monthly vs. quarterly payments only nets you a small increase in compounded return and that's only if you reinvest the proceeds. Without reinvestment, you're left with company performance and the dividend yield.

That being said, if you're using the income to fund current expenses such as during retirement, it helps with budgeting and levels the cash flow stream but you can do that in other ways. I do own Realty Income (O) but not for its dividend schedule.

Well said! I own Shaw, but like you say not for the pymt schedule.

[ChadR]

daat99,

FFO is funds from operations.

[Be Here Now]

(07-18-2014, 01:48 AM)daat99 Wrote: I have no idea what FFO is (yet), I'll read on it more and check the REITs using it for the future purchases.

Here is a REIT web site with many pertinent details. This link is to the FAQ page with a definition of FFO (funds from operations) and AFFO (adjusted FFO). http://www.reit.com/investing/reit-basic...reit-terms

Seeking Alpha author Factoids uses FAD in his analyses, which is the same as AFFO.

Realty Income (symbol O) is a widely owned equity REIT that publishes both FFO and AFFO in its SEC filings (10-K and 10-Q). FAST Graphs (FUN Graphs) reports both numbers.