If your goal is steady, predictable income, monthly dividend investing can feel like financial peace of mind. But not all monthly payers are created equal, and chasing the highest yield can lead to disappointment if the payout isn’t sustainable. The key is finding dividend stocks or funds that can pay consistently and grow those payments over time.
What to look for
Start with stability of cash flow. Monthly dividends only work if the business generates regular income. Real estate investment trusts (REITs), utilities, and infrastructure firms tend to fit this profile because revenue comes from long-term contracts or essential services. Then, look at the payout ratio. This tells you how much of the company’s earnings (or cash flow, in the case of REITs) are being paid out to shareholders. A payout ratio under 75% for regular corporations, or under 90% for REITs, usually signals the dividend is sustainable.
Debt levels matter too. Companies with heavy borrowing are more exposed to interest rate changes, and higher debt servicing costs can eat into cash flow. You’ll also want to consider sector resilience. The best monthly income stocks are those whose services are needed no matter what the economy does.
In short, when looking for monthly dividend income, prioritize quality over yield. Find businesses with strong cash flow, modest payout ratios, reasonable debt, and a record of paying through good and bad markets. The goal isn’t to chase the biggest number, but to build a portfolio that quietly pays you every month, through every kind of market, without nasty surprises.
Consider TF
Timbercreek Financial (TSX:TF) could be a great option in this case. The dividend stock pays monthly dividends, operating in the essential area of mortgage finance and real estate finance in Canada. Right now, its dividend comes out at $0.06 per share each month, providing a yield around 9.6% at writing.
Because it pays monthly, you don’t have to wait for quarterly or annual distributions. That can help with cash flow planning. Furthermore, a 9.6 % yield is much higher than many stocks or even fixed income investments currently offer. That’s attractive for income-seeking investors, especially in a low or slow-growth environment. If the company manages to increase earnings or trim costs, its dividend becomes more sustainable and the valuation could expand.
Now there are risks, including a payout ratio at 130% at writing, and the mortgage and real estate finance sector is more sensitive to interest rates, credit conditions, and market cycles. For long-term income investors, I’d treat TF more as a “high yield with high risk” option than a rock-solid foundation.
Bottom line
TF has many of the features income investors look for: monthly dividends, high yield, and the potential for upside if earnings recover. For someone building a passive income stream, TF can look like a tempting buy, especially if one believes the dividend stock can improve its fundamentals over time. But as always, be sure to discuss any potential purchases with your financial advisor before making any investment decisions.
