Canadian investors continue to seek out ways to create a bit of cash as inflation remains high and interest rates to boot. In fact, the Bank of Canada held the interest rate steady at 5% this week. That means Canadians are looking now more than ever for ways to either save cash or make some. Enter dividend stocks.
Why they’re great
Dividend stocks are great for many reasons. These are stocks that quite literally pay you to own them! You invest, and they’ll pay you a percentage of their share price through dividends. And there are some stocks that have been paying out those dividends for literally decades on decades.
Then there are those dividend stocks that pay you more often. Some will pay out dividends annually; others, quarterly, which is common. However, there are still others that will pay out dividends on a monthly basis.
What’s tricky is that you need to make sure that dividend payment is sustainable. That’s where the payout ratio comes in. If a company is paying out too much in dividends, that means the company may, in fact, cut the dividend in the future. So, ideally, you want a dividend stock with a payout between 30% and 80%.
But be careful!
The thing is, there are a lot of dividend stocks out there. Instead of just picking up one with a high yield, investors need to look carefully at what they’re choosing. Is the stock falling, and is that why the dividend is so high? Have earnings remained strong? Have other issues in the news made it a risky investment?
These are important to note because it’s not just the dividend that you’re investing in. You’re investing in a company. And if that company isn’t doing well, then shares won’t be doing well. If shares stop doing well, then that could lead to a dividend cut.
That being said, there are dividend stocks that tend to fall when the market and economy aren’t doing well or when there is a shift in the markets. That’s why one area where it’s an easy win these days is through industrial stocks, like Granite Industrial REIT (TSX:GRT.UN).
A dream scenario
Granite stock is the perfect choice for a variety of reasons. The company invests in industrial properties. These are properties that provide shipping, storage, and assembly for the products we demand and demand now.
What’s more, these properties are in incredibly high demand and are only looking to expand more. That’s why Granite stock is in such a good position. The monthly paying dividend stock offers a dividend yield of 4.3% as of writing. That payout ratio is a bit high, but that’s because the company’s shares have been down.
As of writing, shares of Granite stock are down 3.5% in the last year. This has provided a great opportunity to jump in and take advantage of a higher-than-average dividend yield. And when consumers start buying again, shares will rise once more to meet the demand.
