This 8.5% Dividend Stock Pays Cash Every Month

Timbercreek Financial Corp. (TSX:TF) is an undervalued dividend stock with a giant yield that is worth targeting in late April 2023.

Ambrose O'Callaghan

Ambrose O'Callaghan graduated with a BA in Political Science from McMaster University. After that, he jumped into the banking world. He worked from the front line to an investment associate role. After that, he found a way to marry his experience and knowledge in the world of banking and finance to his love and passion for writing. Ambrose is a passionate believer in Warren Buffett's value investing model.

Published April 25, 2023 4:15 pm EDT

Canadian markets have had a strong start to the spring season. This may have injected investors with some optimism, as we approach the crucial month of May. Today, I want to zero in on a high-yield dividend stock that you can rely on for its monthly income payout. This could be a solid strategy, as uncertainty still reigns in this economic environment.

Timbercreek Financial (TSX: TF) is the dividend stock I have my eyes on right now. This Toronto-based mortgage investment company provides shorter-duration financing solutions to commercial real estate investors in Canada. Let’s dive in.

Why you should target monthly dividend stocks in this market

The S&P/TSX Composite Index was hit by significant turbulence after the Bank of Canada (BoC) unveiled its aggressive interest rate-tightening policy. This policy change was designed to combat soaring inflation rates that threatened to grind down consumers and destabilize the broader economy. Here we stand, eight interest rate hikes later, and some positive progress has been made on the inflation front.

However, the shift in policy has also limited credit growth and thrown the broader Canada housing market into turmoil. Sales and home prices have fallen sharply in the year-over-year period. These are more reasons to target a dependable dividend stock like Timbercreek.

Should investors be encouraged by Timbercreek’s year-over-year performance?

Shares of this dividend stock have climbed 1.75% month over month as of close on Friday, April 18. The stock has shot up 11% so far in 2023. However, Timbercreek stock has dropped 13% in the year-over-year period. Investors who want more details can dive into the interactive price chart below.

This company released its fourth-quarter (Q4) and full-year fiscal 2022 earnings on February 22, 2023. In Q4 2022, Timbercreek achieved record quarterly net investment income of $31.3 million — up 39% compared to Q4 fiscal 2021. Meanwhile, it posted adjusted distributable income of $18.4 million, or $0.22 per share, compared to $16.2 million, or $0.20 per share, in Q4 of the prior year.

For the full year, Timbercreek reported income from operations of $88.1 million compared to $60.8 million in fiscal 2021. Meanwhile, adjusted distributable income per share rose to $0.79 over $0.74 in the previous year. Timbercreek put together a strong year on the back of its strong interest income and improved mortgage portfolio. While credit growth may be limited in this rate-tightening climate, the company should continue to benefit from higher profit margins.

Here’s why I’m targeting this dividend stock in late April

Investors may be thinking of the adage, “sell in May and go away,” as April winds down. However, Timbercreek is a stock that could potentially provide some cover in the event of a pullback in the months ahead. Shares of this dividend stock currently possess an attractive price-to-earnings ratio of 12. Moreover, Timbercreek is geared up for strong earnings growth going forward.

This dividend stock last paid out a monthly distribution of $0.058 per share. That represents a monster 8.5% yield.