Would you invest in a stock by looking at the next five- to 10-year fundamentals or the preset fundamentals? It depends on your investment horizon and the type of stock you invest in. If you want immediate passive income, this 8.98% dividend stock pays cash every month.
The 8.98% dividend stock that pays cash every month
Most dividend stocks that give monthly cash do not offer a dividend-reinvestment plan (DRIP). However, this 8.98% dividend stock offers DRIP, which means you can either collect your passive income from next month or sacrifice this income for a higher passive income 10 years from now.
The stock I am talking about is a short-term mortgage lender for real estate investment trusts (REITs): Timbercreek Financial (TSX: TF). Its stock price fell as much as 36% during the interest rate hike from April 2022 to October 2023, even when the company reported one of its highest interest income and even gave a bonus dividend in 2023. The pause in interest rates followed by interest rate cuts in the last two months has put the stock on a recovery rally. It has surged 26% from its October 2023 low and 9% in the previous two months.
If you had purchased TF stock during its dip, you could have locked in a yield of over 10%. It is not too late, and you can still lock in an almost 9% yield for decades. This high yield comes with the risk of small-cap stock with relatively low trading volume. It means you may not be able to sell it immediately at a favourable price. Hence, this stock is best for your passive-income portfolio to buy and reap monthly dividends.
Two ways to invest in this 8.98% dividend stock
Invest small amounts for 10 years
In the first method, invest $3,000 annually ($250 a month) for the next 10 years in Timbercreek Financial’s DRIP. Your income grows rather slowly as your invested amount is less. A $3,000 investment now will buy you 391 shares today and earn $112 in dividends in the remainder of 2024. By the time you invest the next $3,000, the stock will return to its average price of $9.5, and you will miss the discounted price.
| Year | Annual Investment | TF Share count $9.5 average stock price | Total TF Shares | Dividend per Share | Total dividend |
| 2024 | $3,000.00 | 391 | 391 | $0.690 | $112.41 |
| 2025 | $3,112.41 | 328 | 719 | $0.690 | $495.85 |
| 2026 | $3,495.85 | 368 | 1,087 | $0.690 | $749.76 |
| 2027 | $3,749.76 | 395 | 1,481 | $0.690 | $1,022.11 |
| 2028 | $4,022.11 | 423 | 1,905 | $0.690 | $1,314.24 |
| 2029 | $4,314.24 | 454 | 2,359 | $0.690 | $1,627.59 |
| 2030 | $4,627.59 | 487 | 2,846 | $0.690 | $1,963.70 |
| 2031 | $4,963.70 | 522 | 3,368 | $0.690 | $2,324.22 |
| 2032 | $5,324.22 | 560 | 3,929 | $0.690 | $2,710.93 |
| 2033 | $5,710.93 | 601 | 4,530 | $0.690 | $3,125.72 |
Over 10 years, you will invest $30,000 from your pocket. If we look at the 2023 annual dividend of $3,125 on a $30,000 investment, your investment could give you a 10.4% yield.
Invest a lump sum and hold it for 10 years
In the second method, invest $15,000 and hold it in the DRIP for the next 10 years. Your investment will buy you 1,953 TF shares, earning a $561 dividend for the remainder of the year and $1,388 next year after adding DRIP shares. Since your dividend amount is high, it can buy you more DRIP shares in your early investment years. If you are nearing retirement, the second method would be more beneficial.
| Year | TF Share count $9.5 average stock price | Total TF Shares | Dividend per Share | Total dividend |
| 2024 | 1953 | 1,953 | $0.690 | $561.52 |
| 2025 | 59 | 2,012 | $0.690 | $1,388.44 |
| 2026 | 146 | 2,158 | $0.690 | $1,489.29 |
| 2027 | 157 | 2,315 | $0.690 | $1,597.45 |
| 2028 | 168 | 2,483 | $0.690 | $1,713.48 |
| 2029 | 180 | 2,664 | $0.690 | $1,837.93 |
| 2030 | 193 | 2,857 | $0.690 | $1,971.42 |
| 2031 | 208 | 3,065 | $0.690 | $2,114.61 |
| 2032 | 223 | 3,287 | $0.690 | $2,268.20 |
| 2033 | 239 | 3,526 | $0.690 | $2,432.94 |
You invested $15,000 from your pocket and let it grow in the market for 10 years. If we look at the 2033 annual dividend of $2,432 on a $15,000 investment, your investment could give you a 16.2% yield.
