As many Baby Boomers begin the journey into retirement, finding sources of reliable income becomes ever more important. Nevertheless, with interest rates at unbearably low levels, many traditional sources of income such as certificates of deposits and money market funds like the PIMCO Enhanced Short Maturity ETF (NASDAQ:MINT) are paying next to nothing. What's worse is that financial obligations are usually owed monthly. We pay our mortgage, cable bill and utilities each month. Most bonds pay semi-annual interest and stocks pay quarterly. Finding good sources of monthly income is paramount. IN PICTURES: What Is Your Risk Tolerance?

Monthly Dividends
Adding monthly dividends has other benefits besides paying your car loan on time. For those reinvesting the income, compounding occurs quicker. Money you can reinvest immediately compounds at a higher rate. This allows portfolios to take advantage of better dollar-cost scenarios. In addition, waiting six months for your money reduces the true yield on your investment. Monthly payments also help smooth out erratic income associated with semi-annual or quarterly payments. Furthermore, a monthly paycheck can help with budgeting and prevent overspending. Annuities have become increasingly popular for investors as they seek to continue their monthly paychecks throughout retirement. However, many of these plans come layered with various fees and surrender charges. While annuities and stock-based dividend funds like the WisdomTree Large-Cap Dividend (NYSE:DLN) can form a solid backbone to a retirement plan, investors can supplement these with monthly dividend paying stocks.

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The Portfolio Plays
For investors looking to assemble a portfolio of monthly income generating stocks, there are some choices across different sectors of the market. There are plenty of closed-ended funds that make monthly distributions, but for investors who want an ETF "wrapper" can add the PowerShares Hi-Yield Equity Dividend Achievers Fund (NYSE:PEY). The exchange traded fund has the distinction of being the only equity-based ETF to pay a monthly dividend. The ETF follows a basket of 50 stocks selected on the basis of high yield and consistent dividend growth. The current yield of the fund is just over 4% and features holdings like insurance company Erie Indemnity (NASDAQ:ERIE) and packaging giant Sonoco Products (NYSE:SON). Expenses for the fund are 0.5%.

Owning rental properties is one way investors can create a monthly paycheck. However, being a landlord entails its own headaches. Real estate investments trusts make owning property easy and both Inland Real Estate (NYSE:IRC) and Realty Income (NYSE:O) offer monthly dividends. Each focuses on retail space and Realty Income owns just over 2,340 retail properties free of mortgage debt. Besides the swath of real estate each stock owns, investors should be pleased that the treasury beats dividend yields. Realty Income currently pays 5% and Inland yields 6.6%.


Utilities are often a go-to sector when looking for dividends. Their predictable and stable cash flows often produce big dividends. Independent power producer and infrastructure owner, Atlantic Power (NYSE:AT) owns a variety of power plants including renewable energy generation across 13 states. The firm features an 8% dividend and a low 19% payout ratio, leaving room for future increases. Gas Natural (NASDAQ:EGAS) is a small regulated Montana natural gas utility operating in six states. The company also owns working interests in 160 natural gas wells along with gathering and transfer pipeline assets. EGAS yields 5.4%.

Bottom Line
For Baby Boomers transitioning into retirement, finding sources of steady income to replace lost paychecks is paramount. (For related reading, see Top 10 Investments For Baby Boomers) While few and far between, some stocks do pay monthly dividends. By adding these companies, investors can smooth out returns and supplement income. Stocks like Penn West Energy (NYSE:PWE) or any of the preceding stocks are good choices for adding that income. Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!