Dividends aren’t guaranteed, and the board of directors can stop, suspend, slash, or increase payouts depending on the company’s financial condition or circumstance. Still, many investors favour dividend stocks over non-dividend stocks because of numerous benefits.
Foremost of these benefits is its usefulness when the market is extremely volatile, like today. Dividends can compensate for or offset stock price declines during downturns. Another advantage of dividends is the acceleration of payback on your investment. A dividend stock’s total return is price gain plus dividend earnings.
The key element of dividend stocks is the income stream they provide regularly. MCAN Mortgage Corporation (TSX: MKP) is my top pick for immediate income. Because of the over-the-top 8.92% yield, you’d receive fatter dividends. A $20,000 investment will produce $446.00 every quarter.
Mortgage lender and investor
MCAN operates in two ways: as a loan company first and a mortgage investment corporation (MIC) second. A loan company in Canada is federally (or provincial) regulated by the Office of the Superintendent of Financial Institutions Canada (OSFI), whose activities are similar to banks. It raises funds from term deposits insured by Canadian Deposit Insurance Corporation (CDIC).
MICs issue shares to investors and uses the pooled funds to invest in mortgages. The Income Tax Act regulates and governs these companies, including MCAN. Thus, the $568.38 million mortgage lender and investor comply with rules applicable to MICs.
Since the operating leverage is generally lower than other regulated financial institutions, MCAN attracts conservative investors. Moreover, the company can deduct dividends from taxable income. Canadians can buy a house or investment property through MCAN Home, one of the three lending businesses.
MCAN Capital offers unique financing and investment opportunities focusing on construction and commercial investments. This national mortgage originator and servicer caters to institutional investors and allows them to participate in exclusive private real estate-based investment funds.
MCAN Wealth provides investment solutions offering competitive rates and charges zero fees. The term options could be short or as long as you want to invest. MCAN Group’s strategy is to pursue long-term sustainable growth and attractive returns.
Business and stock performance
In the first quarter (Q1) of 2023, net income climbed 50% to $23.38 million versus Q1 2022. MCAN’s president and chief executive officer Karen Weaver credits the strength of the core lending business for the impressive quarterly results. Notably, MCAN maintains a quality loan portfolio, as evidenced by the minimal mortgages in arrears.
Weaver is cautious about the economic challenges and housing market uncertainties in 2023, although confident that MCAN can adjust to market changes, especially in a higher interest rate environment. The stock is far from mediocre and steadier than real estate investment trusts (REITs).
At $16.33 per share, current investors enjoy a market-beating 13.93% year-to-date return on top of the juicy dividends. The stock is far from mediocre, given its performance in the last three years. It lost by only 1.1% in 2020, was flat in 2022, and delivered an overall return of 25.7% in 2021.
Safer investment
MCAN Mortgage is a safe investment option for risk-averse investors. The loan company-cum-MIC is well structured and has endured heightened volatility in the real estate sector. The board of directors has declared and approved but has never cut dividend payments since 2012.
