To keep reading, enter your email address or login below.
One problem many investors face is that of monthly bills — yet they have a portfolio stuffed with stocks that pay quarterly dividends.
It is possible to choose a portfolio with staggered quarterly dividends, which would ensure approximately the same income each month. But that’s a silly investment strategy. Investors should be choosing the best dividends they can find without worrying about a payment schedule.
Fortunately, there’s a solution. Canada is filled with stocks that pay monthly dividends, some with succulent yields. Let’s take a closer look at three of Canada’s top monthly dividend payers, which have yields as high as 7.8%.
First National Financial Corp (TSX:FN) is Canada’s largest non-bank mortgage lender with approximately $106 billion worth of mortgages under administration. The company works exclusively with mortgage brokers and does all its business through a handful of regional offices scattered throughout Canada. This helps keep costs down, which means that the company can offer competitive rates while still ensuring a healthy profit for shareholders.
First National makes money a number of different ways. It books a profit when it provides financing for a property. It securitizes the majority of its loans, which essentially means that they’re packaged up and sold to investors. First National makes a profit when it does that, too. There’s potential for the company to make money on changes in interest rates. And most important, it services all the loans it originates. All these combine to make a mortgage powerhouse that generates some $1.2 billion in revenue on an annual basis.
This translates into plenty of profits, and a nice monthly dividend. In 2018, First National generated $2.73 per share in earnings, giving the stock a P/E ratio right around 11. The majority of these earnings get paid back to shareholders in the form of dividends. 2019’s dividend will be $0.158 per share on a monthly basis, good enough for a 6.1% yield.
Dream Global REIT (TSX:DRG.UN) owns 228 properties in Western Europe, comprising nearly 20 million square feet of gross leaseable area. The company has transformed itself from Deutsche Post’s preferred landlord to a diverse real estate company with just 6.5% of total rents coming from its top tenant.
The company is in growth mode, expanding its focus from strictly owning office properties to sprinkling in a little industrial exposure to the portfolio. The company has a robust development pipeline, too. And management has recently begun buying distressed assets that can either be upgraded or that are vacant.
Dream’s price has ran up sharply lately, with shares up 20% in the last three months. This has pushed the yield down somewhat, but the stock still pays investors a safe $0.067 dividend each month. That’s good enough for a 5.6% yield.
From a strictly yield perspective, I’ve saved the best for last. Inter Pipeline Ltd. (TSX:IPL), which has quietly grown into one of Canada’s largest energy services companies, currently pays investors a $0.143 per share monthly dividend, which is good enough for a 7.8% yield.
Inter’s main assets today are three pipelines that transport bitumen from the oil sands to Edmonton-area refineries. The company also owns natural gas liquid processing assets, conventional oil pipelines, and fuel storage facilities. Investors should note the company has committed to spending $3.5 billion on Canada’s first propane dehydrogenation and polypropylene complex. This project is expected to add some $500 million to annual cash flow and come online in late 2021.
Some investors may think a 7.8% dividend isn’t sustainable, but Inter Pipeline’s payout is solid. In fact, the company recently hiked its dividend for the 10th year in a row. 2018’s payout came in at just 61% of funds from operations.
When you buy heavily cyclical stocks at low prices… and then hold the shares until the cycle reaches its peak… you can make a very healthy profit.
Every investor knows that. But many struggle to identify the best opportunities.
Except The Motley Fool may have a plan to solve that problem! Our in-house analyst team has poured thousands of hours into their proprietary research – and this is the result.
Our top advisor Iain Butler has just identified his #1 stock to buy in 2019 (and beyond).
Fool contributor Nelson Smith owns shares of INTER PIPELINE LTD.