What Investments Pay Monthly
This article will discuss what investments pay monthly, including how the value of an investment is calculated.
The monthly dividend calculator can be a great way to determine if an investment makes sense in your portfolio.
What does a monthly dividend calculator do?
The first thing a dividend-paying investment does is regularly pay out a regular income to shareholders.
This could be as high as 5% (which may not sound like much, but if your dividends are invested and then automatically withdrawn from your account, they may end up being worth more than the original investment).
Then, the money you invest earns interest on top of that. The interest on that interest earns more income, and that income may again be paid out as dividends to shareholders.
The process is repeated as long as the dividend investor owns the investment, and the income earned is used to pay the investor's bills.
Most investments work the same way. There are some exceptions, though.
The most common investments that pay a monthly dividend are dividend stocks, ETFs, closed-end funds, index funds, and tax-free retirement accounts.
While there are several ways to pay a monthly dividend, one of the most common is through an automatic dividend reinvestment program.
This automatically gives you a dividend payment at set intervals. A monthly dividend might be a few cents per share, or it could be a percentage of the original purchase price.
Either way, it is more valuable than a dividend you get once every several years.
How much is a monthly dividend?
As mentioned earlier, a monthly dividend can be a little confusing to calculate.
Because the dividend calculation is different depending on how much you own, the monthly dividend calculator provides a way to figure out how much a dividend is worth.
Simply enter how much you own of the investment and the initial interest payment, and the calculator will provide a reliable income calculation.
We use this formula to find the value of a dividend for all of our investing strategies.
Monthly dividend calculator values
At Dividend Investor, we use this formula to calculate the value of a monthly dividend.
Here are the values we use:
- Total Cost = Initial Interest + Total Debt
- Initial Interest = Interest Paid to Investment Interest + 1/12th The Initial Investment Value
- Total Debt = Inflation Adjusted Share Price / Total Capitalized Debt
- Initial Capitalization = Inflation Adjusted Share Price / Total Capitalization
- Inflation-Adjusted Share Price = Initial Investment Value / (Cost of Capital)
- Cost of Capital = Inflation Adjusted Weighted Average Cost of Capital (Over Time)
- Initial Investment Value = Initial Capitalization / (Cost of Capital)
This formula yields the total dollar value of a monthly dividend. The calculation is based on the time value of money.
If the total cost of an investment is higher than the initial cost, you should expect a monthly dividend.
Remember, a monthly dividend is worth more than a quarterly dividend. We've seen an annual dividend grow to $3,000 by using this formula.
The monthly dividend calculator is just a quick way to compare the values of monthly dividends for different investment strategies.
Is a monthly dividend bad?
The monthly dividend process has the potential for bad things to happen. Some investors don't like having to account for their dividend payments at all.
An investor who buys a stock or mutual fund at $25 per share and does not sell within a certain period of time would end up earning $2,250 per year in dividends, based on our research.
If that investor doesn't want to pay attention to the dividend, he or she will end up with a nest egg worth a lot less. Some investors can justify that reason, but it's an easy way to underpay for your retirement needs.
However, if you don't want to pay attention to your monthly dividend payments, it's fine to go with a quarterly dividend. You can expect an annual dividend payment of around $250.
The monthly dividend is a good way to diversify a portfolio. If you own the same investments every quarter, you have a lot of exposure to only one business.
As a result, some quarterly payers may perform better than the entire portfolio.
Why Should You Consider a Monthly Dividend?
Dividends are one of the benefits of stock investing. They offer the potential for generous payments and regular income.
There are two key benefits of a monthly dividend: it's easier to calculate the amount of the dividend, and it's a way to diversify your portfolio.
If you are used to receiving a quarterly dividend, the monthly dividend can feel foreign. However, the monthly dividend is far easier to calculate.
An investor who follows our monthly dividend strategy should have one payment per month, and it's highly unlikely that he or she will go to the website and miss it.
Monthly dividends are less risky than quarterly dividends because you can easily verify the payments. A quarterly dividend could easily end up being less than the cost of your initial investment.