Dream Dividends: Achieve 12.25% Returns to Reach Your Income Goals

A very high-yield dividend stock can help to reach your income goals faster, but your risk tolerance must also be high.

Publicly listed companies and investors attract, if not help, one another. The former creates demand for their stock by paying dividends to shareholders. While the latter invests in dividend-paying companies to drive total returns and generate passive income.

On the TSX60 Index, the dividend yield range is from 0% to 7.63%. Shopify (TSX: SHOP) pays zero dividends, while Enbridge (TSX: ENB) pays the highest. However, in the entire market, some stocks yield more than 8% to as high as 30%. But how high should dividend yields be?

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Dream dividends

Dividend chasers usually have higher risk appetites than regular retail investors. The higher the yield, the better because you can reach income goals sooner rather than later. Today, Fiera Capital (TSX: FSZ) should appeal the most to pure-income investors. Besides the low share price ($7.02), the dividend yield is a juicy 12.25%.

Any amount you invest in the financial stock will double in under six years. Assuming your income goal is at least $200 every quarter, 1,076 shares or $6,531.32 should do it. Some analysts say Fiera’s exceedingly high dividend yield is a red flag, although the warning is disputable.

FSZ hasn’t missed a quarterly payment since Q4 2010. Moreover, the dividend grew consistently in the last 13 years. Performance-wise, to start 2024, current investors enjoy a market-beating 15.3% year-to-date gain on top of the lucrative dividends.

Business overview

Fiera Capital delivers customized and multi-asset solutions across public and private markets asset classes. The $737.9 million independent asset management firm is a capital manager to institutional, financial intermediaries, and private wealth clients globally. As of September 30, 2023, the assets under management (AUM) are approximately $155.3 billion.

The firm’s suite of investments and solutions in public markets consists of small to large caps, including market-specific and global equity strategies and top-down macro and specialized fixed-income strategies. Fiera’s growing private markets platform covers agriculture, infrastructure, real estate, private credit, private equity, and diversified private markets.

Impact of inflation and monetary policy

In the first three quarters of 2023, revenues and net earnings declined 4.2% and 13.5% year over year respectively to $475.7 million and $23.4 million. Fiera said volatility in the stock and bond markets resurfaced due to persistent inflation and tight monetary policies, as evidenced by aggressive rate hikes by central banks.

Management is monitoring the economies in regions in which Fiera operates, including emerging markets. Different headwinds influence each region, but inflation affects all. The firm’s outlook for equity markets remains challenging, and a stagflationary environment might hinder any further valuation expansion or acceleration of earnings.

Nonetheless, the company is confident about its resiliency and ability to execute strategic priorities. The growing and scalable private markets platform should also provide a differentiated value proposition to investors. Fiera has made changes at the senior executive level to help expand and strengthen its global presence and be known as the top solutions provider across asset classes.

Know your risk tolerance

High-yield stocks like Fiera Capital offer exceptional earning opportunities to income investors. However, you must have a high-risk tolerance and hope you get the dream dividends. A piece of sound advice is to moderate your greed or invest money you can afford to lose.

Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Shopify. The Motley Fool recommends Enbridge and Fiera Capital. The Motley Fool has a disclosure policy.

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