A high yield draws the attention of dividend investors, especially if the stock is trading at rock-bottom prices. But it’s important to understand that yield isn’t the only thing you should see in a stock. A high yield might look too tempting to pass on, but you have to analyze the stock and figure out whether the payouts will continue or not.
An aviation company
Chorus Aviation (TSX:CHR) is a Halifax-based company that provides regional aviation services across the globe. The company provides fully integrated regional aviation solutions from acquiring the aircraft to leasing and maintaining it to decommissioning and disassembling it; the company works through the entire life cycle of an aircraft.
Currently, the company’s third-party leasing portfolio consists of 64 aircraft (valued at about $1.3 billion). The company is working with 16 airlines in 15 countries. This diversified portfolio has allowed this $2.9 billion (enterprise value) company to grow its market value by 82% (dividend adjusted).
Currently, the company is trading at a price-to-earnings of just nine and a market value of $7.58 per share. It offers a juicy yield of 6%. So, $10,000 in this company will get you about $50 a month in dividends. The payout ratio is a steady 57%.
A venture exchange REIT
Nexus REIT (TSXV:NXR.UN) was conceived from the merger of Noble and Edgefront REITs. It has a focus on commercial properties and owns (and co-owns) about 71 properties, of which 34 are industrial, 15 are office, and 22 are retail properties. This diversified portfolio seems in a decent enough condition to weather the winds that might sway the housing market the wrong way.
Ever since its inception, the stock has hovered around $2, but saw a 14% growth from the same time last year and is now trading at a mere $2.3 per share. This dirt-cheap stock offers a $0.0133 dividend per share at a very stable payout ratio of 40%. Dividends are paid monthly, and it pans out to a juicy yield of 6.9%. The company hasn’t changed its payouts once in the past five years.
A $10,000 stake in Nexus will earn you about $57.5 a month. But if this little venture continues to grow its market value and graduates to the TSX in the future, its growth prospects seem very high.
A healthcare real estate company
Invesque (TSX:IVQ.U) is a U.S.-based, healthcare-oriented real estate company, with a portfolio of 124 properties. Most of the company-operated properties are in the U.S., with a few in the country. It totals up to about 577,000 sq. ft. of land and about US$1.9 billion in investments. Its business model is a bit different, as it doesn’t operate any of its properties. The operating companies take all the responsibility and the risk.
The company is currently trading at $7 per share. The stock has been steadily declining for the past four years, but 2020 has been a bit better. The market value has grown by about 5.8% since the start of this year.
But the best thing about this stock is its monstrous yield of 10.89%. It will convert a $10,000 investment into about $91 a month passive income. The company pays monthly dividends of 0.0614 and hasn’t slashed its payouts once in the past three years. The dividends seem a bit shaky if you look at the payout ratio. But the fact that the company’s major cash inflow is based on dependable rent income gives a bit of security to the payouts.
Establishing a dependable dividend income from stocks trading at rock-bottom prices is a smart investment move. With the three companies stated above, you could earn about $200 a month with just $30,000 investment. And if the stocks grow in market value, which seems to be the possibility for Nexus REIT and Chorus Aviation, your capital could increase as well.
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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Adam Othman has no position in any of the stocks mentioned.