How to Create a Monthly Dividend Cash Machine

U.S stocks typically pay their dividends quarterly while many foreign stocks pay their dividends semi-annually or even annually. This makes it difficult to create a steady stream of dividend income. The solution is to invest in securities that pay dividends on a monthly-basis. You can actually create a monthly dividend cash machine by investing in these monthly cash payers.

Statistics show that not only do dividend payers outperform non-payers by a wide margin, but high-yield stocks also outpace their low-yield peers over the long haul. Most are familiar with the stock market research conducted by Wharton professor Jeremy Siegel in The Future for Investors.

Siegel presents a strong case for the importance of dividends. First, dividends are strong evidence that the company is really making profits, decreasing the likelihood of financial accounting shenanigans. Second, the dividends, if reinvested, would automatically enable the investor to buy more shares and increase their dividend payments over time.

With the turmoil in the equity markets, you may never see stock prices at this low level again in your lifetime. If you are a long-term investor, now is a great time to purchase monthly dividend payers such as closed-end funds. Remember that you are buying a basket of stocks so you will not be as impacted if one or two stocks continue to tank. Also, at these price levels you will have a great opportunity for capital gains in the future. This is like having your cake and eating it too.

If you are reinvesting your dividends, then monthly dividends increase your compounded returns faster than quarterly payouts. Compound returns may be the last free lunch in the financial markets. Warren Buffett has always mentioned compounding returns as one of his major keys to investing success.

When following this strategy, it is important to invest in a cross-market sample of monthly dividend payers. This will provide portfolio diversification that will provide some protection against market swings. Also, you want to look at securities that emphasize different strategies such as dividend capture, dividend growers, etc. With this in mind, I recently went on a search for companies with monthly dividend payments.

The following is a list of monthly dividend investments from a cross-section of industries. I have included 10 securities when combined would produce 12 dividend payments per month or 120 annually.

• Alpine Global Dynamic - (AGD) - price - $6.10; Dividend Yield - 33.0% - Alpine Global Dynamic Dividend Fund (the Fund) is a diversified, closed-end management investment company. The Fund's primary investment objective is to seek high current dividend income. It also focuses on long-term growth of capital as a secondary investment objective.

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• Pengrowth Energy Trust - (PGH) - Price: $8.33; Yield: 27.4%; Pengrowth Energy Trust (the Trust) is a Canada-based closed-end investment trust. The purpose of the Trust is to directly and indirectly explore for, develop and hold interests in petroleum and natural gas properties, through investments in securities, royalty units, net profits interests and notes issued by subsidiaries of the Trust.

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• Cross Timbers Royalty Trust - (CRT) - Price - $30.76; Yield: 21.62%; Cross Timbers Royalty Trust is an express trust created pursuant to the Cross Timbers Royalty Trust Indenture entered in 1991, between predecessors of XTO Energy Inc. as grantors, and NCNB Texas National Bank, as trustee. The net profits interests are the principal asset of the trust. The net profits interests comprises the 90% net profits interests, which are carved from producing royalty and overriding royalty interest properties in Texas, Oklahoma and New Mexico, and 11.11% nonparticipating royalty interests in non-producing properties located primarily in Texas and Oklahoma, and the 75% net profits interests, which are carved from working interests in four properties in Texas and three properties in Oklahoma.

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• Calamos Convertible & Hi Income - (CHY) - Price: $7.55; Yield: 19.4%; CALAMOS Convertible and High Income Fund (the Fund) is a diversified, closed-end management investment company. The Fund's investment objective is to provide total return through a combination of capital appreciation and current income. The Fund invests at least 80% of its managed assets in a diversified portfolio of convertible and non-convertible income securities.

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• Enerplus Resources Fund - (ERF) - Price: $22.69; Yield: 20.9; Enerplus Resources Fund (Enerplus) is an open-end investment trust. During the year ended December 31, 2007, the Fund's production averaged 82,319 barrels of oil equivalent per day. During 2007, the average production was weighted 53% to natural gas and 47% to liquids on a barrel of oil equivalent basis.

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• Realty Income Corp - (O) - Price: $24.50; Yield: 6.9%; Realty Income Corporation, The Monthly Dividend Company, operates as an equity real estate investment trust (REIT). As of December 31, 2007, the Company owned a diversified portfolio, of 2,270 retail properties; an occupancy rate of 97.9%, or 2,222 properties occupied of the 2,270 properties in the portfolio; 48 properties available for lease; leased to 115 different retail chains doing business in 30 separate retail industries; located in 49 states; with over 18.5 million square feet of leasable space, and an average leasable retail space per property of approximately 8,150 square feet.

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• Gabelli Dividend & Income Trust (GDV) - Price: $8.80; Yield: 15.0%; The Gabelli Dividend & Income Trust (the Fund) is a non-diversified, closed-end management investment company. The Fund's investment objective is to provide a high level of total return on its assets with an emphasis on dividends and income. The Fund will invest at least 80% of its assets in dividend paying securities (such as common and preferred stock) or other income producing securities (such as fixed-income debt securities and securities that are convertible into equity securities).

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• Boulder Growth & Income Fund (BIF) - Price: $4.34; Yield: 32.0%; Boulder Growth & Income Fund, Inc. (the Fund) is a non-diversified, closed-end management company. The Fund's investment objective is total return. The Fund seeks to produce both income and long-term capital appreciation by investing in a portfolio of equity and debt securities. The Fund invests primarily in common stocks, including dividend paying common stocks, such as those issued by utilities, real estate investment trusts (REITs) and regulated investment companies (RICs).

Each of these investments should be viewed as a starting list with more detailed research conducted before investing in these securities. This article is for investing ideas only and should not be viewed as financial investment advice.