As a rule, dividend ETFs distribute their dividends annually, semi-annually or quarterly. A few pay out a dividend monthly. I have picked some attractive ETFs that meet these criteria.
Exchange-Traded Funds with Monthly Dividend Payments
Why are monthly ETFs exciting and popular with some investors?
- A lot of money goes to them. Motivation can increase.
- Passive income – Ideal for investors who need their dividends to live and consume them (can be considered as income).
- An alternative to interest. In today’s low-interest phase, dividends are an opportunity to make more out of your money. Because the interest rate on the call money or savings book is terrible.
- Diversification – with the monthly dividend your portfolio can be diversified more widely. In which the incoming dividends can be used for further/other securities with a savings plan (every month dividend).
- In case of problems of the companies included in the Exchange Traded Funds, it is possible to react faster if a dividend is canceled. This is more difficult for annual dividend payers.
Whether an ETF or a stock pays the dividend monthly, quarterly, semi-annually, annually or perhaps not at all is unimportant as a result. The distribution of the dividend does not affect the yield of the share or ETF. As soon as the dividend is paid out, the share price falls by this amount (dividend deduction).
Trading Exchange Traded Funds is much more conservative and long term oriented then day trading and scalping. The majority of ETF-investors aim for returns of 6-8% p.a. while day traders aim for returns of more than this.
Also, providers like TopstepTrader allow traders to trade their company capital once a selection process was passed successfully. An interesting TopstepTrader review can be found here.
However, higher potential returns come along with higher potential risk. Also trading other people money can put you in an unfavorable position. So if you are a more conservative investor, then ETFs are a right choice. Funded accounts and day trading are for more experienced investors and mainly for diversification purposes.
And ETFs with monthly dividend payouts can be beneficial compared to the regular ETFs with yearly payments.
Passive Income from ETFs?
Let’s take a closer look at the second advantage “Ideal for investors who need their dividends for a living (pension or additional income).”
Can the distributions of shares / ETFs be regarded as passive income at all? Yes, I think so. You participate in the company by purchasing shares and receive a share in the profits in the form of a dividend in return.
This is similar for ETFs. The ETF provider bundles several companies into one package, and then I receive the distribution in the form of a dividend.
But as long as the dividends don’t exceed the profits of the companies in the ETF, you get the continuous cash flow without the invested capital becoming less. The advantage of dividends over the payment of share price gains is that the dividends hardly fluctuate.
These are usually less volatile. Besides, a company can continue to pay dividends even if the share price is at a low level. Companies (aristocrats) do everything possible to maintain dividend payments even in lousy stock market years.
That is why dividend ETFs are as fascinating as passive income.
A small calculation example: If you want to generate 200 dollars of passive income with ETFs. So about 170 dollars gross would have to be earned (estimated value after taxes).
This would mean 3.240 dollars per year. I assume the following parameters: Dividend yield of 3.5% and dividend growth of 5%. If you reinvest 400 dollars + and dividends monthly for 13.5 years, you get a monthly payout of 270 dollars.
Dividends – ETFs That Pay Dividends Monthly
A small selection of ETFs that pay a monthly dividend. There are bond ETFs and equity ETFs, and I’ve picked four attractive ETFs. Two bonds and two so-called high dividend securities (multi-asset and equities).
As an alternative to iShares emerging market government bonds, the USD Emerging Markets Government Bond UCITS ETF can provide a payout yield of 4.69% and a TER of just 0.25%.
It invests in fixed and floating rate US dollar-denominated bonds (government and quasi-government issuers from emerging markets).
Conclusion
If you want to consider a monthly distribution through one or more ETFs, you have a few to choose from. Monthly income can be advantageous in the long run. What you have, you have. Anyone who invests a monthly savings amount in ETFs will be happy if a dividend is paid out in the same month.