3 Dividend Stocks Offering Over 6% Yields

With enough capital invested in high-yield stocks, you can augment your primary income to a great extent, even if you can’t fully replace it.

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Balancing capital preservation with investment income becomes relatively difficult if you rely solely on growth stocks. They lean more heavily on capital appreciation, but depleting your stake at a measured pace can be challenging, especially if the stocks are volatile. You may have to sell more units to take out the same amount of cash during a dip.

That’s what makes generous dividend stock an ideal resource for generating income from investments without depleting your capital. And there are three dividend payers you should look into for a relatively generous yield.

A building materials company

Wood preservation and building materials is a business that thrives during construction booms, but with enough reach, it can be a relatively stable business during modest construction activities as well. That’s the rationale behind investing in Doman Building Materials (TSX:DBM), which used to be Canwel. The company is currently offering a juicy 6.1% yield, and though it slashed its payouts by a small margin in 2020, it has restarted the old payouts.

It also issued a special dividend in 2021 that made up for the difference in former and the new slashed dividends. It’s a $703 million market cap company with an adequate reach within the North American market. It conducts business in both the U.S. and Canada through a total of seven subsidiaries. And its raw-material sourcing is safe thanks to its ownership of 117,000 acres of private timberland, lending more stability to the business.

A senior living facilities company

Markham-based Sienna Senior Living (TSX:SIA) is one of the largest senior care companies in the country, even though it only operates in two provinces: Ontario and BC. The company has a portfolio of 70 senior care residences that it owns and operates an additional 13 that it manages for third-party owners. Two-thirds of the portfolio is long-term care, and the rest is retirement homes. The portfolio is worth about $1.6 billion.

In this type of business, the income/profits are mostly tied to two factors: occupancy and the cost of care of residents. The latter most likely went up during the pandemic.

Sienna’s occupancy is quite healthy (92.4% in the last quarter), and since the company managed to grow its adjusted funds from operations by a decent margin, we can assume it’s doing well in cost management as well. This makes its payouts healthy and the 6.3% yield sustainable, despite an abnormally high payout ratio.

A mortgage company

The real estate sector as a whole tends to be generous with dividends. That’s primarily because of REITs, but even mortgage companies like Atrium Mortgage (TSX:AI) offer reasonably high dividends. The current yield is 6.5%, and the payout ratio of 92.7% is in the safe zone, considering the history of this ratio for the company.

Even though it’s not as attractively priced as Doman, the company is quite fairly valued, making it a smart buy from a valuation perspective as well. The company has a healthy portfolio of mortgage investments, and even though it’s not among the top non-bank mortgage lenders, it does well by offering more flexible mortgage terms and loan structures to its clients.

Foolish takeaway

The three dividend stocks, with their generous yields above 6%, can help you start a $157 a month dividend income with $30,000 invested in the three companies (distributed equally). That’s a healthy income, especially if you keep the companies in your TFSA and get tax-free dividends.

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. The Motley Fool has no position in any of the stocks mentioned.

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