How would it be to pay your bills every single month with just the dividends from your portfolio? What would that for you to do if you could count on that income every single month? Let’s Look at Best Monthly Dividend ETF 2022.
Now, dividend stocks have always been popular, but today we’re covering something even better. I’ll not only receive reveal the three best monthly dividend ETFs, but show you the highest paying dividend funds as well, and how to create your own dividend fund with some of the best stocks in the market.
We’re talking monthly dividend investing today.
Imagine it , having that cash flow which you can count every single month. What would that mean for you?
What would you be able to do knowing that you had that check coming in to pay your bills? That is real financial freedom. But of course, the problem with dividend stocks has always been that the vast majority of the stocks out there only pay dividend every three months.
Now, that makes it tough planning out your bills and how much you can count on from your portfolio.
Before we go into our list of “Best Monthly Dividend ETF 2022”, I wanted to cover a great way to get that monthly cash flow with a little safety and diversification.
- We will first look at the pros and cons of that monthly versus quarterly dividends.
- After that I’m going to show you the highest paying dividend ETFs, regardless of whether they pay monthly or on a quarterly basis.
- Then I’ll reveal my three favourite monthly dividend funds.
So first, does it really matter whether a fund pays a monthly or a quarterly dividend? I assume you’ve got a preference. But if you’ve got lots of dividend stocks or funds in your portfolio, you’re going to be collecting that cash every single month.
Anyway, a monthly paying stocks just make it a little easier to plan out that cash flow if you’re spending your dividends in an idyllic tropical paradise like Cleveland.
But there’s another way to do this. Now, most quarterly paying stocks tend to declare and pay their dividends in the same month every single year. For example, AT&T has paid its dividends in January, April, July, and October for decades without fail. On the other hand, Johnson & Johnson pays its dividend in February, May, August, and November.
Now finding what month a stock pays its dividend is actually pretty easy. You can use the historical data tab on the stocks page on Yahoo Finance or just about any investing platform. It’s going to show you the dividends paid in a stock chart that said those monthly payers may have a stronger commitment to their dividends. This is a big reason why investors are in those shares. So the board is never going to consider a cut.
And for many, that dividend growth is sacred. Either way, though, if you’re going with these monthly dividends, consider throwing in some real solid quarterly payers as well.
Now, before we look at those three monthly dividend ETFs, I want to highlight some of the highest paying dividend funds. Now, the monthly dividend funds that I found off gave some really solid yields. We are talking cash flow up to 20% a year on these high paying funds, so I couldn’t pass up the chance to share these as well.
A word of warning here, and this really applies anytime you’re investing in exchange traded funds. I screened these for the good trading volume and assets under management.
Now that AUM is important because some of these smaller funds that you’ll find , a lot of times they’ll have a tough time covering those expenses or just have to Jack up that expense ratio or shut down .
More than 1 in 4 ETFs have closed since 2014, so this is definitely something you want to watch now . Trading volume isn’t quite as important, but you also want to look at that, to make sure you are able to buy and sell these shares quickly without taking much of a price hit from that bid and ask spread.
The first ETF I found was the InfraCap MLP ETF ticker AMCA, Now this is a closed end fund, and I’m generally not a fan of those. But the fund offers a huge 20% dividend yield, so it’s one to watch if you’re just looking for those high yields.
Now, the way this fund works, and this is how most of those closed in funds produce those high double digit dividend yields is by using leverage on the assets. Now the fund borrows money to invest or will invest in derivatives like futures and options. The problem with this, though, is the expense ratio that percentage of the fund management charges to cover costs. It’s always super high with these closed in funds, and this one is about 2.4%. And that’s compared to a lot of ETFs that you can find with expense ratios of less than a 10th of a percent or lower.
Even some of the monthly dividend ETFs that we’ll look at later have a high expense ratios but are still only like 0.6% or so. But again, it’s tough overlooking that 20% dividend yield, and that can make up for a lot of these higher expense funds, especially in these closed end funds.
Another high paying fund here the UBS ETRACS 2x leveraged BDC Index ETN ticker BDCL, and it’s 15.7% dividend yield. Now this one tracks a group of business development corporations, or BDCs, along with real estate investment trusts or those REITs and the Mastered Limited Partnerships, or MLPs.
BDCs are some of the highest yielding cash flow investments you can find.
BDCs are just companies set up to make loans to small and midsized businesses. Sometimes they’ll make an equity investment in the business as well, and sometimes just invest through those bonds. Now the BDCs themselves leverage up their money by borrowing cheap and then lending it out to this business. Then this fund here is also going to use its own leverage, we’ve got a high amount of risk on this one.
Besides that leverage used in the BDCs themselves. The way the fund produces that dividend yield two times that of the index is that it uses a lot of options and other derivatives on the stock. So instead of just buying the stocks itself to hold in the fund, the BDCL is going to buy call options or something where it can put down half the money and get twice the return. The problem here, Besides the fact that leverage tends to mean that the fund loses more when the market drops.
Expense is also involved in that daily rebalancing those options.
So buying and selling the options to get that 2X leverage means higher expenses, and the fund tends to Underperform the broader index over the long run. In other words, even before fees, you might get that strong dividend yield, but it won’t be exactly two times the BDC index over time.
Now let’s look at these Best Monthly Dividend ETF 2022 , and I’m excited about these because we’ve got some really interesting investment strategies right in these three funds. I’m going to highlight these 3 funds and then I’m going to show you how to create your own monthly dividend fund and three stocks to start with.
Our List of Best Monthly Dividend ETF 2022:
- First, there is the Global X Super Income Preferred ETF that’s ticker SPFF and this fund invests in preferred shares with the highest dividend yields.
Now a preferred share is somewhere between stocks and bonds. It’s not a debt obligation like a bond, but includes a fixed dividend payout that’s higher than most stocks now preferred to get their dividend paid out before stockholders. So it’s a little less risky. And most of these convert to a regular stock at a certain price target.
So preferred shares usually don’t have quite the upside return of stocks, but offer that higher yield and the safety of bonds.
Now the Global Exponent invests in 50 of the highest paying preferred shares and produces a 6% dividend yield against an expense ratio of just 0.6%, which is really good for one of these specialized ETFs. Now the fund does skew a little bit towards those financials and bank stocks because those just happen to be the ones that pay the highest yields on preferred shares. If you’ve got a lot of big names here, though, like Wells Fargo and JPMorgan, along with some smaller names like Ally Financial, the fund has actually produced a 13% total return over the last year.
So there’s also some room for price appreciation. Besides just that dividend yield.
- Next is the First Trust Multi Asset Diversified Income ETF Ticker=MDIV and this is a really interesting all in one asset class investment. The fund invests evenly across five asset classes that typically produce the highest cash flow returns. These are dividend stocks, REITs MLPs preferred shares like we just talked about and then high yield bonds. Now the management fee is a little higher here at .7% but still lower than any of those closed in funds that you’ll find, and the dividend yield of 6.7% really makes up for it as a bonus on this one, the volatility of the fund.
So the measure of how risky those shares are is just 8% compared to 12% on the overall market.
That’s S&P 500 index. Now that’s a result of the 20% invested in those preferred shares, which are usually less risky than the stocks and really bring that fund volatility down a little bit.
- This next one is The VanEck Vectors, Fallen Angel high yield bond ETF, or Ticker Angl. This fund invests in bonds that were originally issued with an investment grade rating. So a strong financial rating, but that have been since downgraded into that high yield category.
Now this is usually on slightly weakening financials or if the company added adds more debt. But 93% of the bonds in this fund are in just two risk ratings just below that investment grade, so still fairly safe investments. Now, what happens when these fallen Angels get downgraded, though, is the price of the bond comes down, but it’s still paying.
Now the interest rate goes up , but they’re still solid companies, the default rate is lower and this group of bonds has outperformed the broader high yield index. In eleven of the last 15 years. The fund itself has produced an 8.4%.
The expense ratio here is just 0.4% and again, these are bonds of good sized companies like Sprint and Freeport. Almost three quarters of the fund is in bonds of US companies, with the rest in those developed nations.
And this is really well diversified across those sectors as well, with bonds and companies in nine sectors. Now these monthly ETFs are really interesting and they’re not quite as expensive as the specialized funds that we saw first.
But you’re still looking at a fee of around $4 for every 1000 you’ve got invested even in the cheapest bond fund.
Hope you liked our Article on ” Best Monthly Dividend ETF 2022 ” Please read our Other Article on” iShares ETF vs Vanguard”https://equitygyan74899394.wordpress.com/2021/11/05/ishares-etf-vs-vanguard/