This Financial Stock Has a 9.3% Yield and Pays Out Every Month

Timbercreek Financial Corp. (TSX:TF) is a financial stock that offers value and a fantastic monthly dividend payout.

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 May 29, 2023 6:15 pm EDT

Canadian investors have been forced to contend with market turbulence since late April and early May. There are murmurs that the Bank of Canada (BoC) could move forward with another interest rate hike, which could put more downward pressure on the broader market. Some investors may want to pursue an income-oriented approach in the weeks and months ahead.

Today, I want to zero in on a financial stock that pays out a monthly dividend and offers a superb 9.3% yield. Let’s sink our teeth in!

How has this financial stock performed over the past year?

Timbercreek Financial (TSX: TF) is a Toronto-based mortgage investment company that provides shorter-duration structured financing solutions to commercial real estate investors in Canada. Shares of this financial stock have dropped 5% month over month as of close on Friday, May 26. Meanwhile, the stock is still up 1.3% in the year-to-date period. Investors who want to see more of its recent performance can play with the interactive price chart below.

Should investors be pleased with Timbercreek’s recent earnings?

This company released its first quarter (Q1) fiscal 2023 earnings on May 8. Timbercreek achieved record quarterly net investment income of $32.7 million in Q1 — up 44% compared to the previous year. Meanwhile, it also posted record net income and comprehensive income of $18.1 million compared to $13.8 million in Q1 fiscal 2022.

Management praised the company’s financial performance in the opening quarter of the new fiscal year. Adjusted distributable income rose to $18.3 million or $0.22 per share, which was up from $15.2 million, or $0.18 per share, in Q1 2022. The payout ratio of 79.1% beat out management’s target payout range. Timbercreek’s earnings were powered by improved interest income and a strong mortgage portfolio.

Timbercreek has maintained a conservative portfolio risk composition, which should allay investor fears in the near term. Its commercial real estate portfolio possesses a 68.5% weighted average loan to value, with 92% of first mortgages in the mortgage investment portfolio. Moreover, 89% of the mortgage investment portfolio is invested in “cash-flowing properties.”

Canadian investors should be conscious of the evolving situation in domestic real estate as borrowers have been forced to contend with sharp interest rate increases. Fortunately, Timbercreek’s strong mortgage portfolio composition should provide a cushion as we move forward.

Shares of this financial stock currently possess a favourable price-to-earnings (P/E) ratio of 10. Meanwhile, Timbercreek is on track for strong revenue and earnings growth going forward.

Here’s how you can churn out passive income with this financial stock

Canadian investors hungry for a strong monthly dividend stock should look no further. Timbercreek last announced a monthly cash dividend of $0.0575 per common share. That represents a monster 9.3% yield. For example, if we had $5,000 to play with, we could theoretically snatch up 676 shares of this financial stock for a purchase price of $4,995.64. This investment will allow us to generate monthly passive income of $38.87 going forward. That works out to annual income of $466.44.