By Peter Mastrantuono
Perform an internet search on “weekly dividend stock portfolio” and you’ll get a surprising amount of written and video content on how to construct a stock portfolio that will provide you with weekly dividend income. The idea is popular enough that SoFi, the online personal finance company, created an ETF for that very purpose—The SoFi Weekly Dividend ETF (WKLY).
Constructing a Weekly Dividend Income Portfolio
Investors can build their own weekly dividend income portfolio via investment in a handful of dividend-paying stocks whose dividend-payable dates collectively work out to weekly dividend payments.
Stocks typically pay dividends on a quarterly basis, but their payable dates are not limited to calendar quarters. They tend to be spread out in a way that some company is paying one of its quarterly dividends during each week of the year. The trick is to identify the collection of companies that will cover every week.
It sounds complicated, but it can be done with as few as 12 stocks.
Alternatively, investors can choose to invest in WKLY for greater diversification and added simplicity, but it comes with a relatively hefty management fee of 0.49%. That may not sound like much, but consider a portfolio of dividend-paying, high-quality companies with an average yield of three percent. The fees on WKLY would end up reducing that portfolio’s yield by over 16%. For some, that’s a high price to pay for convenience.
The Price Paid for Weekly Income
An investment in a weekly dividend-paying portfolio of $100,000 earning a three percent yield will deliver $57.69 in income per week. The comfort one may derive from this hypothetical regular, periodic payment seems insufficiently consequential in view of what investors may be sacrificing simply to force fit investments to accommodate a weekly dividend payment schedule.
For instance, consider two companies with the same dividend yield but different payable dates. It so happens that Company A’s payment schedule better accommodates the objective of weekly payments, in the context of other dividend-paying investment candidates.
All things being equal, Company A would be a better choice than Company B. But things are rarely “all equal”. What if Company B has a better record of increasing dividends over time? What if Company B has a greater potential for capital appreciation? Should these considerations be ignored simply because it’s not a convenient fit to the calendar? That can be a very costly lost opportunity.
One of the enduring features of our capital markets is the fad investment—that shiny idea that has more marketing attraction than investment sense. The weekly dividend strategy may not be without its benefits, but no serious financial advisor would suggest that the timing of dividend payments should take precedence over the investment merit of a company.
Financial advisors have helped many retirees structure a sound retirement income portfolio that combines guaranteed income streams, interest income (taxable and tax-free) and dividend income, placing the need for income security and growth of income over the dictates of the calendar. And by making this income immediately accessible through check writing, debit cards or automatic deposits to an individual’s bank account, there seems little compelling reason to fall for the gimmick of weekly dividend payments.
Peter Mastrantuono is a contributing writer to MyPerfectFinancialAdvisor, the premier matchmaker between investors and advisors. Peter worked for over 30 years in the wealth management industry, focusing on retirement planning, investing, asset allocation and financial planning.