Don’t Fall for These 3 Dividend Stocks: Cuts Are Coming

Top dividend stocks like Sienna Senior Living Inc. (TSX:SIA) offer nice value, but earnings may not support its sky-high distributions.

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Caution, careful

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The S&P/TSX Composite Index was up 76 points in early morning trading on Thursday, August 17. Some of the top-performing sectors included energy, base metals, and utilities. Today, I want to look at three high-yield dividend stocks that could be at risk of a cut to their distributions in the months ahead. Let’s jump in.

This is the first dividend stock I’d be wary of as earnings battle to cover its hefty yield

Wall Financial (TSX:WFC) is a Vancouver-based company that operates as a real estate investment and development firm. Shares of this dividend stock have climbed marginally month over month as of mid-morning trading on August 17. The stock has surged 47% so far in 2023.

This company released its first-quarter (Q1) fiscal 2024 earnings on June 14. Wall Financial reported total revenue and other income of $32.4 million — down from $32.9 million in Q1 fiscal 2022. Meanwhile, net earnings attributable to the company fell sharply to $2.73 million compared to $29.9 million in the previous year. The dip in net earnings was primarily due to the sale of an investment property. Regardless, the company’s recent earnings suggest that Wall Financial might need to readjust its dividend payout in the months ahead.

Shares of this dividend stock are currently trading in middling value territory at the time of this writing. However, it last declared a monster cash dividend of $3 for each common share. Investors should keep an eye on Wall Financial’s dividends going forward.

Here’s a top REIT that investors should watch out for in 2023

Northwest Healthcare REIT (TSX:NWH.UN) is a Toronto-based real estate investment trust (REIT) that owns and operates a global portfolio of high-quality healthcare real estate. Its shares were down 1.37% in late-morning trading on August 17. This REIT has fallen sharply in the year-over-year period.

Investors saw this REIT’s Q2 fiscal 2023 results on August 11. Total revenue rose 12% year over year to $126 million. Meanwhile, total assets under management (AUM) rose 1% to $10.3 billion. However, net asset value (NAV) per unit dropped 4.6% to $12.55.

Shares of this REIT are trading in favourable value territory at the time of this writing. However, current earnings are struggling to cover its monster monthly distribution of $0.067 per share, which represents a 12% yield. Northwest is still undervalued right now, but investors should keep an eye out, as the company may move to release some pressure on the distribution front.

One more dividend stock that could be the victim of cuts in the near future.

Sienna Senior Living (TSX:SIA) is the third dividend stock investors should keep an eye on for potential cuts in 2023. This Markham-based company provides senior and long-term-care services to clients across Canada. Shares of this dividend stock have increased marginally over the past month. The stock is up 6.9% so far in 2023.

In Q2 2023, this company delivered same-property net operating income growth of 9.3% to $37.1 million. Total adjusted revenue jumped 10% to $198 million, and adjusted funds from operations per share climbed 13% to $0.032. Sienna currently offers a monthly dividend of $0.078 per share, representing a super 7.9% yield. Sienna’s earnings and interest payments are struggling to support its sky-high monthly distribution. That could lead to a cut down the road in 2023.

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 Ambrose O'Callaghan has no position in any of the stocks mentioned. The Motley Fool recommends NorthWest Healthcare Properties Real Estate Investment Trust. The Motley Fool has a disclosure policy.

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