When dividend stocks go on sale, it could provide an excellent opportunity to buy in, because assuming the company has not cut the dividend, you can lock in a higher yield. The two stocks listed here already offered good dividends, but after declines of more than 5% in their share prices, those dividends are even more attractive.
The key question to answer is why the share price has declined by so much. If it is something that materially impacts the company’s future performance and ability to maintain its dividend, then the payout may be in jeopardy. However, if the share price has declined for reasons beyond the company’s control, then it may present a good opportunity to buy the stock at the current price.
First National Financial Corp.’s (TSX:FN) share price dropped over 7% in the past month and pushed its already high dividend up to over 7.3%. First National’s dividend is paid monthly and could offer a great a source of monthly income for your portfolio. This incredible dividend is also surprisingly sustainable as the company’s monthly payout of $0.154167 amounts to a total of $1.85 paid out per year, per share, or roughly half of the company’s earnings per share of $3.74.
Now that we’ve established that the dividend is sustainable, what is behind the company’s decline in share price? The company saw a big drop in value after it released its quarterly earnings in late July.
Overall, the company saw a strong quarter with increased sales year over year. However, a decline in the number of mortgages may have turned away investors. In addition, a rising interest rate environment might have made prospective buyers of the mortgage lending company a bit more hesitant amid uncertainty about its ability to maintain its current level of profitability.
Pure Industrial Real Estate Trust (TSX:AAR.UN) doesn’t have as high a dividend as First National, but at just under 4.9%, it still presents a very solid yield. Pure Industrial’s dividend is also paid out on a monthly basis. At an annual dividend payment of $0.312, the company is paying out just under 33% of its earnings per share.
It is unclear what may have sent the stock price tumbling in the past month, as the company did not have any earnings during that time, nor did it receive any bad press. With no apparent reason for the decline in the company’s stock price, that may suggest that other market or industry forces pushed down the value of shares.
The company has had four consecutive quarters of sales and profit growth, and another strong quarter could send the price back up and the dividend yield down. Pure industrial has shown tremendous growth over the past three years with revenue climbing over 70% during that time and profits more than quadrupling.
Bottom line
Both of the dividends here present excellent opportunities to get great monthly yields that can boost your income. In addition, both companies have excellent growth opportunities, and the stocks could rebound sooner rather than later.
