Dividend Stocks Providing Monthly Income

When a corporation turns a profit, it has two choices: It can keep the profits and reinvest them in the company, where they become retained earnings, or it can distribute them to the shareholders. That distribution is a dividend. Dividends can take several forms. A company can issue a stock dividend in which additional shares are distributed to existing shareholders, or it can issue a dividend of property. The most common dividend, however, and the one that tends to adhere to a regular payment schedule, is simply a cash payment distributed on a per share basis. In the world of dividends, not all shares are created equal.

Common stock, the kind issued by every corporation, may or may not have a qualified dividend. If it does, the Board of Directors will declare the dividend amount at the company’s annual meeting. The company then pays on an announced schedule, whether annually, quarterly or monthly. Like the share price itself, the dividend can change with the company’s fortunes. If times are especially bad, the dividend can be suspended. Preferred shares are different. When issued, those shares come with the company’s promise to pay dividends at a set rate, the coupon rate, while the shares are outstanding. The coupon rate is set when the shares are issued, so that initial investors can anticipate a certain dividend yield going forward. Like common stock, however, preferreds are traded on the open market where share prices rise and fall. Since later buyers pay a different price for their shares, their dividend yield will differ from the initial coupon rate for better or worse.

Source: Wall Street Pit

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