Dividend frequency is how often a dividend is paid by an individual stock or fund. Dividend frequency can vary from monthly to annually. The managers of an investment will determine its dividend frequency, which can be based on numerous factors, including interest rates.
Key Takeaways
- Dividend frequency is how often a stock or fund pays a dividend.
- Management determines the dividend frequency, which may include monthly, quarterly, or biannually, among others. Most publicly-traded stocks pay dividends quarterly,
- A special dividend is a one-time dividend payment made outside the schedule of the regular dividend frequency.
- A special dividend would be included in an investment’s trailing 12-month dividend yield, but would not be included in a forward dividend yield calculation.
- Real estate investment trusts (REITs) and master limited partnerships (MLPs) are required to pay dividends, with some paying monthly dividends.
Understanding Dividend Frequency
Dividend frequency varies across investments and is determined by an investment’s management. Dividends, generally issued as cash payments orstock shares,are often paid monthly, quarterly, biannually, or annually. Managers can also choose to pay a special dividend, which occurs outside of the regular dividend frequency.
Special Considerations
Individual Stocks
Stocks are the most common type of individual security that investors seek out for dividends. Corporate managers often commit to target dividend payout rates and strive to achieve consistency once a dividend frequency has been established.
Publicly traded stocks often choose to pay dividends quarterly in conjunction with earnings announcements, cash flow reports, and forward projections. Real estate investment trusts (REITs) and master limited partnerships (MLPs) are two types of publicly traded corporations that are required to pay dividends, often leading to more frequent dividend payments. Some REITs pay monthly dividends, boasting a monthly dividend frequency.
Managed Funds
With managed funds, the fund’s managers choose the dividend frequency. Managed funds typically maintain a consistent dividend schedule, which is detailed in a fund’s prospectus. Managed funds have the advantage of paying investors dividends from income received by all of the investments in the fund. Managed fund cash flow management can often provide for more frequent dividends.
Dividend Frequency vs. Dividend Yield
The dividend yield is a metric used when evaluating income investments. It is a measure of the income produced from an investment. A forward dividend yield calculation utilizes expected dividend frequency in its calculation, which provides investors with an estimate for the annual dividend.
The forward dividend yield multiplies an investment’s most recent dividend by its expected annual dividend frequency and then divides by the investment’s price. The result is an estimated dividend yield reported as a percentage of the investment’s value.
Both stocks and managed funds may also pay special dividends that are provided outside of the standard dividend schedule. A special dividend would be included in an investment’s trailing 12-month dividend yield. However, it would not be included in a forward dividend yield calculation.
The Whitestone REIT (WSR) is one of the highest-paying dividend investments in the U.S. market. As of Aug. 2021, the company was paying a monthly dividend that equates to a 4.52% dividend yield.
