Dividend investing can help shareholders create a steady stream of income at a low cost. For instance, you can create passive income by purchasing a single stock of any dividend-paying company.
There are several high-dividend TSX stocks, such as MCAN Mortgage (TSX: MKP), that are attractive to the income investor. Valued at $565 million by market cap, MCAN currently offers shareholders a tasty dividend yield of 9.54%.
Is MCAN Mortgage a good stock to buy right now?
MCAN Mortgage operates as a loan and mortgage investment company in Canada. It is engaged in real estate lending and investing activities, including residential mortgages, residential constructions, and commercial loans.
The company is structured as a flow-through mortgage investment corporation, which means it is not taxed at the corporate level and distributes all its taxable earnings each year.
In the third quarter (Q3) of 2023, MCAN Mortgage reported a net income of $18.5 million, or $0.53 per share, up from $11.7 million, or $0.37 per share, in the year-ago period. Its impressive bottom-line expansion meant MCAN ended Q3 with shareholder equity of 14.2%, up from 10.5% in the same period in 2022.
Despite a challenging macro environment, MCAN’s net income surged over 80% year over year to $57.6 million, or $1.66 per share, in the first nine months of 2023. MCAN attributed its net income growth to higher net corporate spread income, which rose by $8.2 million in Q3 and $25.2 million in the last nine months.
MCAN emphasized, “While the economy continues to change and provide uncertainty, we are committed to a strategy of managing controllable factors to protect our bottom line and taking advantage of opportunities that arise.”
Can MCAN stock sustain its dividend yield?
MCAN pays shareholders an annual dividend of $1.52 per share. These payouts have risen by 50% year over year in the last 10 years. MCAN offers shareholders a dividend-reinvestment plan (DRIP) and enjoys a 30% participation rate among shareholders.
The DRIP program has historically provided MCAN with a reliable source of new capital while enabling existing shareholders to acquire additional shares at a discount compared to market value. In the last 10 years, MCAN stock has risen just 38%. However, after accounting for dividend reinvestments, total returns are closer to 300%.
Analysts tracking MCAN stock expect adjusted earnings per share to rise from $1.77 in 2022 to $2.48 in 2024, which should drive cash flows and dividends higher. Priced at 6.4 times forward earnings, MCAN stock is quite cheap and trades at a discount of 15% to consensus price target estimates.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| MCAN Mortgage Corp. | $15.93 | 790 | $0.38 | $300 | Quarterly |
The Foolish takeaway
You can earn $100 in monthly passive income if you purchase 790 shares of MCAN Mortgage, which will cost you over $12,100 at the current price. While MCAN has a quarterly dividend payout, you will earn $300 each quarter, translating to a monthly payment of $100.
Investing such a high amount in a single small-cap stock is very risky. Instead, you need to identify other quality, high-dividend companies and create a diversified portfolio of TSX stocks.
