Dividend stocks make for great investments if you want to generate recurring cash flow. The big downside is that most dividend stocks pay you only every three months, which may not be optimal if you want to generate monthly income from them to help supplement your earnings.
But there is a way you can get around that, without having to invest in stocks that specifically pay you on a monthly basis. Rather than limiting your options, you can simply invest in dividend stocks that pay at different times of the year. By investing in at least three dividend stocks, you can strategically select income investments that will provide you with cash flow every month of the year.
Three stocks that can be excellent options for such a strategy are Kraft Heinz (NASDAQ: KHC), Procter & Gamble (NYSE: PG), and Toronto-Dominion Bank (NYSE: TD). By investing in all three of these companies, you can build your portfolio around some solid dividend stocks while ensuring you're getting a dividend every month.
1. Kraft Heinz
Kraft Heinz is known for its strong consumer brands and products that are found in millions of homes across the country. It's the type of stock that can make for a dependable long-term investment. And its dividend is a key reason many investors buy the food stock. Kraft has been paying a steady $0.40 quarterly dividend since 2019, which today yields around 4.8%. It makes payments every March, June, September, and December.
The company has been facing challenges amid inflation as consumers have been trading down to private label products. But overall, the company's financials still look reasonably good. Through the first nine months of the year, Kraft's sales totaled $19.3 billion, representing a year-over-year decline of 2.6%. Investors may be concerned with the massive 71% decline in earnings this year, but if you factor out goodwill impairment charges, its profits would be down by a more modest rate of 17%.
The company has, however, generated more than $3 billion in free cash flow over the trailing 12 months, which is far higher than the $1.9 billion it has paid in dividends during that time frame. Even with the headwinds it's facing today, Kraft's dividend still looks safe. And as economic conditions improve, so too should its financials.
2. Procter & Gamble
Another top consumer company to invest in is Procter & Gamble, with brands such as Tide, Pampers, and Gillette helping it reach a broad range of customers. It has a terrific track record for paying and increasing its dividend. The stock is a Dividend King and has raised payouts for an impressive 68 straight years, with the most recent hike being a 7% boost to its dividend earlier this year. It makes payments every February, May, August, and November. Currently, the stock yields 2.4%, which is not as high as Kraft but it's still better than the S&P 500 average of 1.3%.
The company recently posted its first-quarter results for fiscal 2025, which were relatively stable overall. Net sales of $21.7 billion for the period ended Sept. 30 were down just 1% year over year and operating income was up by 1% to just under $5.8 billion. While Procter & Gamble may not be a top growth stock to own, its stable and fairly consistent results can make it an attractive option for buy-and-hold investors.
3. Toronto-Dominion Bank
The highest-yielding stock on this list is that of Toronto-Dominion Bank, which pays 5.3%. The Canadian-based bank pays a dividend every January, April, July, and October. Together with the other stocks on this list, that would ensure you're collecting a dividend in each month of the year.
Toronto-Dominion stock hasn't been a popular buy with investors of late as there are concerns the Canadian and U.S. economies aren't in great shape moving forward, which could weigh on its earnings. Plus, the bank was recently hit with a massive $3 billion fine as it didn't do enough to stop criminals from laundering money. There will also be limits put in place on its assets, hindering its growth prospects in the near term.
This is, however, a good example of what can be a bad-news buy for investors. The bank stock has normally posted strong, consistent profits over the years and while the headwinds it's facing today are concerning, they also shouldn't cripple the business, either. Buying on weakness gives investors the ability to secure a higher-than-typical yield for the stock, while potentially setting themselves up for future gains as the bank strengthens its internal controls and processes, and improves its overall operations.
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David Jagielski has no position in any of the stocks mentioned. The Motley Fool recommends Kraft Heinz. The Motley Fool has a disclosure policy.
