Buy These 3 High-Yield Stocks With Healthy Payout Ratios

The payout ratio is a good way to understand a dividend-paying company’s financial stability, and it’s a good way to decide what to invest in.

| More on:
Growing plant shoots on coins

Image source: Getty Images

Dividend investing is one of the best ways to maximize the returns on your investment as a stock market investor. When investing in dividend stocks, what do you look for? If you want well-rounded returns, you might consider the dividend payouts and growth potential for a particular stock.

If generating a passive income is your primary goal, a company’s dividend yield and financial stability become more important factors.

While a thorough fundamental analysis paints a clearer picture, there are quicker ways to understand the financial strength of a company. As an income-seeking investor, you want to ensure the dividend stock you are investing in can sustain its payouts for a long time. For this, the payout ratio can be a quick way to understand whether the underlying business can fulfill your investment goal.

Typically, high-yielding dividend stocks also come with unsustainably high payout ratios. With the market fluctuation underway, several top-notch stocks are trading at discounted valuations. While healthy otherwise, declining share prices have inflated dividend yields to higher-than-usual levels.

Today, we will look at three high-yield dividend stocks with seemingly sustainable payout ratios you should keep on your radar.

MCAN Mortgage Group

MCAN Mortgage Group (TSX:MKP) is a $548.5 million market capitalization mortgage investment company headquartered in Toronto.

The company aims to generate a reliable income stream by investing its funds in a diversified portfolio of mortgages, alongside various real estate and securitization investments. Generating most of its revenue through equity and mortgage income, it has a long dividend history.

MCAN saw good performance in its first quarter for fiscal 2023, with its net income climbing by 50% compared to the same period last year. The strength of its core lending business made for impressive quarterly results.

As of this writing, it trades at $15.48 per share, paying its shareholders a 9.82% dividend yield. Despite an alarmingly high payout yield, the ratio is at a slightly risky 60.3%.

Alaris Equity Partners

Alaris Equity Partners (TSX:AD.UN) is a $676.1 million market capitalization open-ended income trust. Alaris, through its subsidiaries, provides alternative financing to various private companies.

In return, it gets distributions with the goal of generating stable and predictable cash flows that the trust uses to distribute payments to its unit holders. Based on a percentage of top-line financial performance, the trust adjusts distributions.

The company’s business model is simple. It invests in businesses needing capital that do not want to give up control over their companies.

While it has not been a great pick for capital gains potential for a few years, Alaris did really well after the Great Recession. As of today, it trades for $14.86 per share and pays its shareholders a 9.15% dividend yield. While high, its payouts have a reasonable 48.2% payout ratio.

BTB REIT

BTB REIT (TSX:BTB.UN) is a $246.9 million market capitalization Real Estate Investment Trust (REIT). The trust owns and manages a portfolio of real estate properties throughout the country. While it has a diversified portfolio, BTB REIT primarily focuses on assets in necessity-based commercial properties, off-downtown core offices, and industrial properties.

Q2 2023 saw its rental revenue and net operating income increase by 9.4% and 8.2%, respectively, from the same period last year. The persistent leasing activity due to high real estate prices continues favouring BTB REIT. As of this writing, BTB REIT trades for $2.87 per share, paying its shareholders a juicy 10.5% dividend yield. Despite being this high, its payout ratio is 71.4%.

  • We just revealed five stocks as “best buys” this month … join Stock Advisor Canada to find out if BTB REIT made the list!

Foolish takeaway

By slowly building a portfolio of reliable dividend stocks, you can achieve various short- and long-term financial goals. If you are looking for high-yielding returns through dividend stocks, these three picks can be excellent choices to consider.

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 Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends Alaris Equity Partners Income Trust. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Businessperson's Hand Putting Coin In Piggybank
Dividend Stocks

RRSP Ready: 2 Stellar Stocks for Your Annual Contribution

Two high-yield stocks are ideal options if you plan to maximize your annual RRSP contribution limits and reduce taxable income.

Read more »

grow dividends
Dividend Stocks

3 Stocks That Could Be Easy Wealth Builders

Long-term investors would be wise to have these three Canadian stocks on their radar.

Read more »

question marks written reminders tickets
Dividend Stocks

Dividend Investors: Is BCE Stock a Buy Now?

BCE now offers a 7.9% dividend yield.

Read more »

edit Taxes CRA
Dividend Stocks

CRA Money: 2 More Days to Boost Your Tax Refund!

Dividend stocks like Toronto-Dominion Bank (TSX:TD) can be great RRSP holdings.

Read more »

grow money, wealth build
Dividend Stocks

3 TSX Dividend Stocks With Yields Above 7% (But Are They Safe?)

These three dividend stocks all have ultra-high yields, making them some of the best to buy if you're looking to…

Read more »

Light bulb with jester hat perched on top
Dividend Stocks

3 Canadian Dividend Stocks With Payouts That Are No Joke 

Here are three top Canadian dividend stocks long-term investors would be remiss to ignore, particularly at these current valuations.

Read more »

clock time
Dividend Stocks

Is it Too Late to Buy These 3 Brilliant Passive Income Stocks?         

TD Bank stock is just one of three stocks that are well positioned to continue to provide passive income for…

Read more »

rail train
Dividend Stocks

Canadian National Railway Stock: Buy, Sell, or Hold?

Railways like Canadian National Railway (TSX:CNR) are great long-term options. But is now the time to buy Canadian National Railway…

Read more »