Paydays Are Different
In my working years I was usually paid bi-weekly or semi-monthly. Those are similar, so it was likely that I would be paid two times every month. However, dividends can come in almost daily, depending on the investments you purchase. For example, in January we received 43 dividend payments, February was 29, March was 67, April was 40, May was 22, and June was 60. There is some variation due to buying and selling covered calls, but March, June, September, and December are always the big dividend months.
Of course, some of the 60 June dividend payments were on the same day of the month. For example, June 15th and 30th were big days. However, dividends came into our accounts seventeen days of the 30 days. Because eight of the days were Saturdays and Sundays, and no dividends post on the weekend, we received dividends on seventeen of 22 business days.
When Are Dividends Paid?
As with many things in the investing world, the answer is “it depends.” The company’s board of directors has to approve any dividend payment. ETFs also have to determine when they will be the dividends that came into the ETF during the month or the quarter.
The dividend frequency varies across investments. Dividends, generally issued as cash payments most of the time, but sometimes a company will issue additional stock shares as a special dividend. Most often, cash dividends are often paid monthly, quarterly, biannually, or annually. The managers can also choose to pay a special dividend, which can happen at any time, but is generally hard to expect in advance.
Quarterly dividends are the most common form of dividend. That is one of the reasons that March, June, September, and December are big months for income from our investments. However, the Canada bank stocks we own (TD and CM) don’t pay in those months. If you own an ETF that holds stocks, it is likely that you will see your dividends in March, June, September, and December.
Some companies have an attractive approach for retirees that want monthly income. Cindie and I own shares of REITs and BDCs and many of them pay monthly dividends. Some examples are MAIN, GAIN, and O. A BDC is a business development company that usually gets monthly income from their ownership of many smaller businesses. REITS are real estate investments, and because tenants pay their rent monthly, the REIT has income to distribute monthly. ADC and O are examples of this type of investment.
Less common is the semiannual dividend payout. The mining company with the ticker symbol RIO (Rio Tinto Group) has, in the last two years, paid both semiannual dividends and special dividends. For example, on April 22 I received both a semiannual dividend of $4.17 per share and a special dividend of $0.62 per share.
International Company Dividends
International companies also pay dividends. So, for example, you might only see one dividend per year from a foreign company. This is not always the case, but you should look before you leap. Furthermore, other countries love to tax your dividend before you get it, so you might expect to receive $100 as a dividend, but a country could take taxes and leave you with $90.
I stopped investing in individual companies in France because I found their taxes to be a significant drain on the real income. However, because of various tax treaties between the U.S. and many countries around the world, the actual amount of dividends withheld from U.S. investors is often less than the tax others might pay.
Because of the taxes on dividends, I generally would avoid holding foreign investments that have big dividend taxes from my IRA or ROTH IRA. The good news is that you can see the taxes withheld when you download your activity from Fidelity Investments.
While the dividend frequency might not be important to you in your working years, it can matter in retirement. The other factors to consider are the dividend dates and automatic dividend reinvestment. That is for a future post.