The following is a guest blog post:
Passive income is what everyone is looking for when they invest in stocks. While most get quarterly or annual dividends, there are those companies that will give you monthly returns that supplement your income. Depending on what you have, it could be a modest return or something more. That is dependent on the stocks owned reflecting the stake one has in the company.
The dividends also matter. If you have $1,000 worth of shares in a company, you get the dollar value, for example, 50 cents, of what you have. That means you receive $500 in dividends. Companies that issue out monthly payments often do so to show their profitability. What they give is essentially a token of appreciation for investing with them.
Whether you are a family lawyer Toronto holds in high esteem or a teacher looking to have a comfortable retirement, it is never too late to invest in stocks.
Benefits of monthly dividends
Most companies hold back and make large annual dividends payments as they are impactful. Getting $500 monthly is fantastic, but getting $6,000 annually allows yearly planning. However, if you do need of extra income during the month or wish to supplement your pension, then opt for stocks paying monthly dividends.
Alternatively, the other benefit of monthly payouts is you can slowly grow your shares by reinvesting the cash they give you. That way you do not get to use your money, and you compound your dividend. If, instead of taking the $500 and you reinvest it back, your shares will be worth $1500. In the following month, you stand to get a pay of $750.
Given there is automation, you can reinvest and grow your shares without going back into your pocket to increase the investment. This approach is best implemented in your early years when you have a steady source of income. That way, when you retire, that can instead begin receiving dividends based on your stock share in cash form. You will rip handsomely from the compound interest gotten over the years.
Ultimately, for some, the reason to take monthly payments is simple. Having large amounts of money stored is a recipe for poor financial decisions. Therefore if you perceive that you are not entirely good with money and wish to become better at planning your money, then monthly dividends are best. If anything you will work better at saving should you not choose to reinvest.