One way for income-hungry investors to keep cash flowing is to assemble a portfolio that shells out dividends every month.
The idea is to assemble 12 stocks or funds with alternating distribution dates so that you never wait long for cash. This strategy can be a complement to a bond ladder, another time-tested tool for automating cash flow.
Because share prices are soaring, the current yields on some former dividend favorites have dipped well below 2%. However, many other dividend aces still yield at or above 3%.
So with the full S&P 500 index priced to yield about 1.5% (down from 2.4% a year ago), here’s a dividend-a-month portfolio whose 12 elements average 3% or better on new money. (Yields are as of early April.)
Capital is spread over numerous sectors — a critical diversification advantage over an undisciplined chase for maximum yield. And you have growth opportunities.
Keep your cool. Do not get impatient over cyclical or short-term principal losses.
A big dividend means these shares , oil stocks excepted, tend to trade in a tight price range.
Realty Income (O), the choice for November, is an exemplar. Every time Realty Income dips a few bucks, it bounces up. The same holds for Verizon Communications (VZ). You can buy these sorts of securities on dips with confidence, presuming we don’t suffer another bear market.