There are stocks as we all know that pay dividends quarterly, but there are some stocks that pay dividends monthly as well. Income investors think about investing at safe options like McDonalds, Proctor & Gamble or IBM which offer stability and pay dividends quarterly.

Such companies are financially stable, have plenty of liquidity and hence stocks are easy to buy and sell. These have enough income and reserves of cash to cover their cash dividend payouts every 3 months to the investors.

Few things are to be kept in mind by investors for these types of quarterly dividend paying stocks. The income stream of the investor is given to a single company for each stock that is owned and based on the mix of stocks in the portfolio of the investor, the dividend income is rushed at only one time in one month of the quarter. Thus little or no cash comes in for the other two months.

Instead the stocks that pay dividends monthly can provide consistent and steady flow of income on a monthly basis to investors. The above mentioned issues are overcome as follows.

The stocks that pay monthly dividends are traded regularly on stock exchanges. They have plenty of liquidity and can be easily bought or sold. Trusts, closed end mutual funds and other investment vehicles are the ones that generally pay monthly dividends. They own a portfolio of income producing assets and distribute cash generated by such assets monthly to the investors.

The benefit to investors lie in the fact that they get diversification of the underlying portfolio and exposure to a single company risk is avoided. If the investors owned a single company stock that paid quarterly dividends this would not be the case.

Also since the income stream from monthly dividend stocks comes three times as often as the quarterly counterpart, the income is going to be distributed. Since investors need consistent income similar to retired persons each month for their needs, this is a clear benefit.

The prime thing that the investor must check while deciding to invest in a monthly dividend paying company as compared to a quarterly one is mainly – understanding the assets held by the monthly dividend paying company. Even though this needs some additional homework to be done it is easily achieved by collecting information from the standard government filings. This is because publicly traded companies have to file with the SEC.