Higher-Than-Inflation Rate: 3 Dividend Payers With Over 7% Yields

Investors can generate considerable financial buffers from three high-yield stocks to cope with rising inflation.

| More on:
think thought consider

Image source: Getty Images

The Bank of Canada raised its key interest rate last week, the first hike since 2018. According to Governor Tim Macklem, the move was necessary to cool demand-driven inflation. However, a tighter monetary policy will impact borrowers.

Macklem said, “The impact of raising our policy rate will be higher interest rates for Canadian households and businesses, including many mortgage and prime lending rates, but also rates for savings products.” He further adds, “The economy is now in a place where moving to a more normal setting for interest rates is appropriate.”

Canada’s inflation rate of 5.1% in January 2022 was well above the central bank’s target. The BoC is committed to bring down inflation to the 2% and keeping inflation expectations well anchored, Macklem said. Meanwhile, Canadians can cope with inflation through dividend investing.

Three under $10 dividend-payers have yields of over 7%, which is 2% higher than the latest inflation reading. You can choose from Timbercreek Financial (TSX:TF), Doman Building Materials (TSX:DBM), and Diversified Royalty Corp. (TSX:DIV). However, understand the risks in each company before taking a position.

Strong pipeline of opportunities

Timbercreek Financial is a $781.9 million non-bank, commercial real estate lender. It provides shorter-duration, structured financing solutions (less than five years) to commercial real estate professionals. The stock generates strong risk-adjusted yields for investors because of the conservative lending policy.

In Q4 2021, Timbercreek experienced high funding and robust transaction volumes. Net mortgage investments rose 1.4% versus Q4 2020. Net income reached $2.41 million compared to the $1.61 million net loss. For the full-year 2021, net income was $41.3 million, a 29.1% year-over-year increase.

Blair Tamblyn, Timbercreek’s CEO, said, The fourth-quarter results reflect a highly active period on the funding front and healthy transaction volume.” He adds, “Heading into 2022, the operating environment is likely to be noticeably improved and the pipeline remains strong.” At only $9.52 per share (+0.16% year to date), the dividend yield is a lucrative 7.26%.

Growth strategy is unfolding

Doman Building Materials saw its net earnings in 2021 climb 78.7% to $106.5% million versus 2020. Its adjusted EBITDA rose 57.7% year over year. This $659.74 million company is the only full integrated national distributor of building and related materials in Canada. In North America, Doman is the leading distributor of building materials.

Amar S. Doman, Doman’s chairman of the board, said, “I am pleased with how our growth strategy continues to unfold, resulting in record annual sales and net earnings.” While robust activity and pricing could continue in 2022, management said increasing interest rates and other similar factors may impact market dynamics. The stock trades at $7.61 per share and pays a 7.36% dividend.

Cheap, high-yield stock

Diversified Royalty investors enjoy a 9.14% year-to-date gain thus far in 2022 on top of the generous 7.24% dividend yield. The royalty stock also trades at an absurdly cheap price of 3.04% per share. Your $6,000 can buy nearly 1,974 shares and generate $434.40 in annual dividends.

The $380.20 multi-royalty company owns the trademarks to and collect royalties from six royalty partners. Mr. Lube, AIR MILES, Mr. Mikes, Sutton, Nurse Next Door, and Oxford Learning Centres are gradually recovering from the pandemic’s fallout.  

Financial buffer

The high-yield stocks in focus can generate considerable financial buffers to help investors cope with rising inflation.

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

More on Dividend Stocks

Specialty Brands faces higher raw materials costs.
Dividend Stocks

What’s Next for Premium Brands Stock?

Shares of the specialty food production and distribution company have fallen about 25% since last October.

Read more »

Double exposure of a businessman and stairs - Business Success Concept
Dividend Stocks

2 Interesting Buys in Any Market

Here are two intriguing buys in any market climate that offer defensive appeal as well as growth and income earning…

Read more »

Dividend Stocks

TFSA Investors: 3 TSX Stocks for Tax-Free Passive Income

These Canadian corporations have strong visibility over future earnings and dividend payouts.

Read more »

Simple life style relaxation with Asian working business woman healthy lifestyle take it easy resting in comfort hotel or home living room having free time with peace of mind and self health balance
Dividend Stocks

Lazy Landlords: 3 Cheap Canadian REITs to Buy in May 2022

You can become a passive landlord today by investing in Canadian REITs. Here are three cheap REITs to consider this…

Read more »

Target. Stand out from the crowd
Dividend Stocks

4 High-Yield TSX Stocks to Buy Ahead of Their Ex-Dividend Dates

If you have some cash lying idle, consider these high-yielding TSX stocks.

Read more »

growing plant shoots on stacked coins
Dividend Stocks

Passive Income: 3 TSX Stocks With Rapidly Growing Dividends

Worried about inflation? Here are three passive-income stocks to buy that pay rapidly growing dividends.

Read more »

Family relationship with bond and care
Dividend Stocks

Retirees: 4 Safe Stocks to Buy for Decent Passive Income

Retirees can offset the impact of runaway inflation by buying safe dividend stocks to create more cash flows.

Read more »

Canadian energy stocks are rising with oil prices
Dividend Stocks

3 Canadian Energy Stocks to Buy for Reliable Passive Income

Canadian energy stocks are gushing cash. Here's three top stocks that are perfect buys for reliable passive income.

Read more »