There’s nothing better than getting paid for just holding on to an asset. Except if those dividends are paid monthly. Stocks that pay their dividends every month can provide faster compounding when those payouts are reinvested, not to mention budget simplification. After all, mortgage payments, car loans and utility bills are due every month. The only problem is, the number of individual stocks that pay their dividends monthly have been slowly dwindling over the years.
Luckily, plenty of exchange-traded funds (ETFs) have moved in to fill the void.
While the vast majority of monthly dividend ETFs own bond and fixed income assets, there are more than 40 funds that invest in equities. With these ETFs, investors can gain valuable diversification benefits, decent yields, and a steady monthly paycheck. In many cases, buying the diversified dividend ETF makes more sense than buying individual stocks that pay monthly. This can be especially true for those in or near retirement.
Do you buy a monthly dividend ETF? Which fund? How do you separate the wheat from the chaff? Luckily, InvestorPlace has done some of the work for you.
With that, here are three monthly dividend ETFs worthy of your portfolio.
Monthly Dividend ETFs to Buy: WisdomTree U.S. Total Dividend Fund (DTD)
Dividend Yield: 2.13%
If you’re looking for a single-core fund to provide plenty of monthly dividends, then the WisdomTree U.S. Total Dividend Fund (NYSEARCA:DTD) has to be the first stop. Not only is DTD one of the oldest and largest monthly dividend ETFs on the market, it also has some of the widest coverage out of any ETF out there.
WisdomTree is known for its fundamentally weighted and proprietary indexes. DTD is no different and racks the WisdomTree U.S. Dividend Index. This index screens and weights firms by the number of dividends they are projected to pay in the upcoming year.
The best part is that the ETF does this across large-, mid-, and small-cap U.S. stocks. That’s important as many dividend ETFs only focus on the big guys. Small- and mid-cap stocks can pay amazing dividends as well.
Holdings for the ETF range from giants like Microsoft (NASDAQ:MSFT) to relative unknowns like J&J Snack Foods (NASDAQ:JJSF). All in all, with the inclusion of small- and mid-cap stocks, DTD boosts its holdings north of 860. This wide net provides plenty of diversification.
It also pays some decent dividends. Currently, DTD pays a market-beating 2.13% yield. And the ETF has paid that dividend monthly since its inception. This yield, expanse of holdings, and monthly payment makes DTD one of the best core solutions for income seekers.
Expenses for this dividend ETF run at a cheap 0.28%- or $28 per $10,000 invested.
SPDR Dow Jones Industrial Average ETF (DIA)
Dividend Yield: 2.10%
For many retirees or investors near retirement, owning small-caps can provide some restless nights of sleep. After all, even dividend-paying smaller stocks still provide plenty of volatility. To that end, focusing on the big boys could be the way to go. And you can’t get much bigger than the Dow Jones Industrial Average.
While the Dow Jones does get called a flawed index due to its weighting formula, you can’t deny that the index holds 30 of the biggest and most stable blue-chips in the world. This has a ton of appeal for investors.
The SPDR Dow Jones Industrial Average ETF (NYSEArca:DIA) is the way to gain access.
The “Diamonds” hold all thirty stocks in the index and provide access to leading firms like Bank of America (NYSE:BAC), Home Depot (NYSE:HD) and Visa (NYSE:V). It really is a who’s who of America’s leaders and provides instant access to these blue chips. The ETF is very liquid and trades millions of shares per day. Moreover, expenses for the fund are super cheap at just 0.17%.
Unlike its holdings — which pay quarterly dividends — the DIA pays its dividend every month. This allows investors to own the biggest stocks in the nation and get the needed income to fit their budget. No wonder why more than $21 billion worth of investor cash sits in this dividend ETF.
The fund is a great way to score a good monthly dividend from stocks.
Invesco KBW High Dividend Yield Financial ETF (KBWD)
Dividend Yield: 9.14%
A quick scan of many of the top individual monthly dividend pay stocks happens to be mortgage REITs (mREITs) or business development companies (BDCs). Given the nature of their underlying businesses, stocks in these categories tend to be on the riskier side of things. Not to mention, they can be a bit difficult for laymen to evaluate and research. As a result, stocks like mREIT AGNC Investment Corp (NASDAQ:AGNC) compensate investors for that risk with yields in excess of 11%.
But there is a way to score the high yield, reduce risk, and still get a monthly payout. That’s through Invesco KBW High Dividend Yield Financial ETF (NYSEArca:KBWD).
KBWD tracks the KBW NASDAQ Financial Sector Dividend Yield Index, an index of mREITs, BDCs, and other high-yield financial stocks. With it, investors can access up to 40 different stocks in these categories. This helps cut down on the risk and potential issues with individual stocks in the sector. However, what investors don’t sacrifice is income. KBWD’s broad portfolio still allows it to provide a massive 9%-plus dividend yield.
Like the other two dividend ETFs on this list, KBWD pays their dividend monthly. Expenses for the fund clock in at just 0.35%.
With its broad access to these risky stocks and its high yield, KBWD could be one of the best dividend ETFs to boost your overall monthly income.
At the time of writing, Aaron Levitt did not own any stocks mentioned.