Monthly vs. Quarterly: The Dynamics of Dividend Payouts in Canada

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Investing in dividend stocks can be a great way for the everyday person to build wealth. In my opinion, it’s a more reliable way to accumulate wealth than investing in growth stocks. The main reason for this is that dividend stocks tend to be well-established companies. This allows these companies to start funnelling capital towards shareholders in the form of dividends as opposed to injecting as much capital as possible towards growth and expansion.

In addition, companies that pay dividends have often overcome many of the major hurdles that they’ll need to encounter over the course of their lifetime. For example, dividend stocks might be a leader in their respective industries. That means these stocks may face less competitive pressure, which could put shareholders at ease. In addition, if a company’s business is so secure that they’re able to pay dividends, then it may mean that the company has proven some sort of market fit for its products or services.

It’s important to note that when looking at dividend stocks to add to your portfolio, there are different payment schedules that a company may follow. The two main dividend payment schedules that may arise in your research are monthly and quarterly dividend distributions.

In this article, I’ll discuss two great dividend stocks. One of them pays investors monthly, and the other pays quarterly. I think both belong in a dividend portfolio, but decide for yourself which schedule (and stock) aligns more with your interests.

A great monthly dividend stock

Northland Power (TSX:NPI) is a great stock for those who are interested in a monthly dividend. If you’ve never heard of this company, know that Northland is a renewable power company that operates a portfolio of assets with a generation capacity of about three gigawatts (GW). The company has an additional 16 GW of potential capacity along different stages of development.

A monthly dividend could be of interest to investors who are seeking a more frequent dividend payment. Say, for instance, you’ve retired. And you’re hoping to fund your everyday life solely through dividends. It could feel like an eternity, waiting for the next quarterly dividend. That’s where monthly dividends come in. Each payment may be a bit smaller than what a quarterly dividend could give you, but the frequency of each payment could put you at ease and allow you to budget more effectively.

A top quarterly dividend stock for your portfolio

When it comes to quarterly dividend stocks, Bank of Nova Scotia (TSX:BNS) is one of the first stocks that comes to my mind. This is a company that needs little introduction. It’s a component of the Big Five, which is a group of five large Canadian banks which sit atop the industry. Bank of Nova Scotia is also the most international of Canada’s big banks, with a particular focus on the Pacific Alliance. That’s a region which includes the countries of Chile, Columbia, Mexico, and Peru.

Bank of Nova Scotia has been paying shareholders since 1833. That represents 190 consecutive years of dividend payments. If that’s not reliable enough for investors, I’m not sure what would be. Because Bank of Nova Scotia’s dividend comes every quarter, each payment arrives as a larger sum. For example, in 2023, the company’s annual dividend was $4.18. That’s an average dividend payment of $1.045 per share per quarter. Had the company paid a monthly dividend, shareholders would have received $0.35 per share each month.

Foolish takeaway

The Canadian stock market offers investors a lot of options when it comes to dividend stocks. It’s important that investors consider which dividend payment schedule they want to follow, whether that be monthly or quarterly. The former would allow you to receive a more frequent dividend, but the latter would give you larger payments each time. Both could be good options, but depending on what you’re looking for, one may be more suitable for your portfolio.

The post Monthly vs. Quarterly: The Dynamics of Dividend Payouts in Canada appeared first on The Motley Fool Canada.

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Fool contributor Jed Lloren has positions in Bank Of Nova Scotia. The Motley Fool recommends Bank Of Nova Scotia. The Motley Fool has a disclosure policy.