Tag Archives: shares

Using Dividend Paying Stocks to Create Monthly Income

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If you are trying to live off of your investments, you might want to try to have some new income coming in each month, rather than once a year or once every quarter. CPP, OAS, GIS, many annuities and most pensions pay monthly. It’s also possible to have some of the income from your investments pay monthly.

Written: 2012
Reviewed: 2023
Revised: 2023

Canadian Dividend Stocks that pay a Monthly Distribution

Many of the stocks that pay a dividend or distribution monthly are targeting the needs of people requiring a monthly income. They are often stocks that don’t offer huge potential to increase in capital value, but which can provide a steady, modest profit.

The industries these companies are in can vary widely.

Diversifying a Canadian Monthly Dividend Stock Portfolio

Uniforms
K-Bro Linen Systems (KBL) is a Canadian stock that pays a monthly dividend. This is one of those companies that keeps beavering away behind the scenes without most of us noticing them. They provide, wash and deliver linens including uniforms to many businesses across Canada. They started as a diaper washing service. Now they provide clean uniforms and bed linens to many major hospitals and other industries. But just as few people launder diapers nowadays, there is no guarantee that companies will continue to require a laundry service for their uniforms and linens.

So I’m not saying buy KBL. I’m just stating a fact: it pays a nice monthly dividend. And it’s in quite a different area of business than, say, A&W.

Mortgages
Firm Capital Mortgage Investment (FC) is another Canadian stock that pays a monthly distribution. According to their company website, Firm Capital “is a non-bank lender providing residential and commercial real estate finance.”

You’d have to look at the details on the company to see if you think their strategy is sound and whether it meets your ethical criteria. And, as anyone who invested in US real estate in the 2000s knows, supplying mortgages can be a risky business. Don’t buy shares in FC without investigating it yourself and understanding the risks.

UPDATE: Also be aware that as interest rates start to climb, companies that deal in mortgages may drop in value for reasons I don’t fully understand but which I have read more knowledgeable analysts talk about. Do your research!

Fast Food
Several of the fast food businesses are available as stocks that pay monthly distributions. These payments may be dividends, non-eligible dividends, interest or return of capital. You have to check the details before deciding if the investment is a good fit for you.

One example is A&W. Yes, shares in the root beer and burger chain are sold on the TSX under the symbol AW.UN. Distributions are paid monthly.

You have to decide for yourself whether they are financially stable and whether selling fast food which could potentially be unhealthy is ethically acceptable to you. I’m just saying the shares are out there.

Linens, mortgages and fast food. While I’m sure these all tie together somehow, they are not 3 stocks in the exact same category of business. So as you can see, you can diversity your holdings into various parts of the market, while still earning a monthly income.

Movies
There was a time when Cineplex paid a dividend. Alas not in 2023.

Disclaimer
I’m not saying “buy these stocks.” I’m just saying these are examples of Canadian stocks that pay monthly distributions. Do your research, or hire someone trustworthy to do it for you. I just want you to know there are choices out there that may meet your needs nicely.

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When Can I Buy a GIC or Mutual Fund After I Sell a Stock in my BMO InvestorLine Self-Directed Account?

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In 2023, when you sell a stock in a self-directed brokerage account, such as a BMO InvestorLine account, the actual settlement date is 2 full trading days later, which is abbreviated as T+2 for transaction date plus 2 business days. So, for example, if I sold a stock on a Thursday, and Friday and Monday are normal trading days, the settlement will take place on Monday. So when can you buy a GIC or a mutual fund after you sell a stock in your InvestorLine account?

Note: When this was written in 2012 settlement occurred 3 trading days after the purchase or sale order was filled, which was called T+3. And now, in 2023, the USA regulators are already at work trying to shorten the settlement date to T + 1, the date of the transaction when the order was filled, plus one business trading day, starting in the fall of 2024. Please confirm settlement dates with your brokerage!

Written: 2012
Reviewed: 2023
Revised: 2023

What is the Settlement Date?

Settlement is when my broker hands over the share certificates (admittedly electronically nowadays) and the other broker hands over the enormous sum of cash to pay for my shares. It dates back to the days of paper certificates which had to be physically moved from a secure location to the buyer.

So If I Want to Buy a GIC, How Long Do I Have to Wait After Selling a Stock?

When I sold some shares on a Thursday in 2012, to my surprise, the sale value showed up immediately in my “cash” listing with BMO InvestorLine. Being a suspicious sort, I emailed BMO and asked when I could actually use that money to buy a GIC.

BMO replied that I have to wait until at least Monday, 2 full business days after the trade because in 2012 trades settled in T + 3 business days.

The GIC purchase order would go in overnight to take place on Tuesday, and the settlement of my stock sale would also take place over that same night, so the cash would be in my account on Tuesday to pay for the GIC.

GICs, as you can see, settle one full business day after the purchase order is placed. Stock sales settled 3 full business days after the purchase or sale order is placed in 2012. Because these deadlines don’t line up, you have to be careful.

Now, in 2023, with a settlement date of T + 2, if I sold a stock on Thursday, I could place an order to buy a GIC on Friday, and both the purchase and sales would close on Monday.

Being a naturally cautious person, I think I would wait till the settlement date to place a GIC order. Although if there was a super-incredible rate available, I guess I might test the system and place the order on the day before settlement, as suggested.

If I Want to Buy a Mutual Fund, How Long Do I Have to Wait After Selling a Stock?

Presumably, the BMO answer would be the same for a mutual fund. In 2023, with T+2 settlement, the order could be placed on the first full business day after the sale of the stock, since it would not be effective until the second business day after the sale. Again, as an ultra-conservative investor, I would likely wait till the trade had settled before placing the order.

If I Want to Buy Another Stock, How Long Do I Have to Wait After Selling the First Stock?

Stocks are easier. For either a purchase or a sale of a stock in 2023 the settlement date is the trading date plus 2 trading days. So if you sold a stock and then bought another different stock later that same day, it would work, because the settlement dates would be the same day.

The settlement dates would also be the same if we do migrate to T+1 in the future.

The Moral of the Story: Watch Out for Differing Settlement Dates!
I have a sneaking suspicion that these self-directed brokerage accounts have been set up so that they will not let you buy or sell unless your settlement dates line up. But I guess if you have the option (little financial pun there, catch it?!) to spend money you don’t have in your account (I believe that’s called working on “margin”) then it might let you put through a purchase when you don’t have the funds available yet from your sale. So make sure you know your dates will line up, and as the Sergeant used to say on Hill Street Blues “Be careful out there.”

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Have you ever ended up buying something with money you didn’t have in your self-directed brokerage account? Did it turn out Happily Ever After, or did you get burned with an unexpected fee? Please share your experiences with a comment.