by Lawrence Meyers | February 3, 2014 2:35 pm
In the universe of dividend stocks, a huge percentage of them pay out on a quarterly basis. Yet there’s a number of monthly dividend stocks out there, too — and there are some particular advantages to getting your payouts on a monthly basis.
If you’re someone who has certain fixed expenses, getting a monthly dividend check you can rely on to pay those expenses can take a load off your mind. If you are retired, having monthly dividend stocks that pay you every 30 days might mean a totally different quality of life. Living on a fixed income often means having to juggle certain consumption behaviors around when that income arrives.
If so, these dividend stocks are for you.
Many of these monthly dividend stocks are actually closed-end funds, which are like mutual funds, but with a few differences. One of the big ones is that, whereas mutual funds take money in and pay money out to investors on a daily basis, a closed-end fund raises a fixed amount of money through an IPO and then trades like a stock.
One word of warning first, though: Most of these are not big-volume stocks, and trade about 50,000 shares per day. Small orders aren’t likely to move the market much, but be aware, and use limit orders and stop-losses when dealing with them.
ACP Dividend Yield: 8.35%
Avenue Income Credit Strategies (ACP) interests me for several reasons. For starters, the portfolio manager came from Third Avenue Management, a mutual fund family I respect and have invested with in the past.
The other reason I like ACP is because it invests in distressed debt and equity — meaning assets that are struggling. These assets, if properly evaluated and purchased at the right price, can return multiples of the original investment. ACP currently holds debt of companies including Clear Channel Communications and CHC Helicopter.
These assets are generally not available to the average investor, so ACP is a good way to get involved.
AFT Dividend Yield: 6.62%
As monthly dividend stocks go, there’s also reason to buy Apollo Senior Floating Rate Fund (AFT). This is another credit-driven fund, so I like it because that’s an area I happen to be involved in. AFT’s goal is to make investments in senior, secured loans to companies whose debt is rated below investment grade (i.e., junk).
It’s the “senior” part of this dividend stock that is important. The fund takes the top position in the firm’s capital structure, and will often insist on structural changes to the deal if the company or economy deteriorates. Being in the senior position means that if something goes wrong, AFT is first in line to get its money back.
AIF Dividend Yield: 7.87%
In the same dividend stocks family, we have Apollo Tactical Income Fund (AIF).
IAF takes the senior loan concept but diversifies it by adding in high-yield bonds with shorter durations than most of the junk bond market.
The “tactical” description refers to the dividend stocks’ ability to allocate the balance between loans and bonds depending on market conditions.
AGD Dividend Yield: 8.23%
Our last dividend stock is Alpine Global Dynamic Dividend Fund (AGD). I like AGD because more than 50% of its dividends are tax-exempt, it invests across all market caps, it covers both growth and value, and it does so globally. The CIO, Stephen Lieber, has a whopping 62 years of industry experience. AGD also is a relatively focused fund.
If you’re wondering how strong this strategy is, the fund pays nearly 8% in annual yield. Name one mutual fund that is dividend-driven with this kind of return.
As of this writing, Lawrence Meyers did not hold a position in any of the aforementioned securities. He is president of PDL Broker, Inc., which brokers financing, strategic investments and distressed asset purchases between private equity firms and businesses. He also has written two books and blogs about public policy, journalistic integrity, popular culture, and world affairs. Contact him at firstname.lastname@example.org and follow his tweets @ichabodscranium.
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