Income investors or retirees seeking a stable, predictable stream of income should strongly consider buying an ETF or stock which pays out monthly dividends. While these stocks are less common than quarterly payers, there are still some great stocks out there which will pay you each month.

Even better, if you choose to re-invest your shares each month by enrolling in a dividend re-investment plan (DRIP), you will be quite shocked to see how much money you will have made over time due to the powers of compound interest.

I believe there are two main reasons why investors should consider adding a stock or ETF which pays out a dividend each month:

Reason #1 — Compounding Monthly Leads to Bigger Gains!

If you own a stock which pays a dividend every single month, as opposed to a quarterly paying stock, you have a big advantage!

It is a mathematical fact that if your interest is compounded every single month, you will end up with more money — as opposed to compounding your money once every four months, semi-annually or annually.

*Here is an example. Let’s say you have $10,000 to invest in a dividend paying stock. You wisely choose to re-invest your dividends in a DRIP account. Stock A earns you 10 percent annually for 5 years, but pays you a quarterly dividend. Stock B also earns you 10 percent annually for 5 years, but pays your dividend monthly. You add no further capital into each stock.

After 5 years, the value of your position in stock A amounts to $16,386.16, a gain of $6,386.16. Not bad. However, in stock B you will have $16,453.09, or about $67 more than stock A! Remember, you earned exactly the same amount in interest per year. However, compounding your money every month means bigger gains.

See for yourself at Investor.Gov .

Reason #2 — More Flexibility

Receiving dividends every month is much more convenient than getting dividends quarterly, semi-annually or annually. This is especially true for those in retirement who needs to receive income every single month.

Think about this — when you budget your income and expenses, do you do it each month or each quarter? Think about how much easier it is to do it by month.

Bottom line? Getting your dividend checks each month makes budgeting your money much, much easier!