One of the best times to buy a high-yield dividend stock is when they are on the verge of recovering from the slump that pushed their yield to a high level. The reason is that you still have access to the high yield that attracted you to the stock in the first place, and you can also benefit from the recovery-field growth these stocks offer — the best of both worlds.
If you buy them for a passive income, you can stash them in your Tax-Free Savings Account (TFSA). You can add them to your Registered Retirement Savings Plan (RRSP) portfolio if you need additional cash to build a sizable nest egg.
A mortgage company
MCAN Mortgage (TSX: MKP) is one of the smaller players in the Canadian mortgage industry, even if we stick to non-bank mortgage lenders. It’s at the low end of the small-cap, with a market capitalization of just $640 million.
Ironically, the market cap is something many investors want to see on a much higher end in their dividend stocks. However, MCAN Mortgage is still a solid choice, thanks to the solid yield and dividend history combo that it’s offering.
The company currently offers its dividend at a mouth-watering yield of 9.2%. If you invest $15,000 in the stock, you can generate a monthly income of about $115. The history is quite impressive as well. The stock has been raising its payouts consistently for several years, and its payout ratio has remained stable in the past decade and below 70% for seven out of the last 10 years.
The stock performance is also decent, so investors don’t have to worry about their capital drowning as they cash in the dividends. The low payout ratio, reflecting possible undervaluation, is another reason to buy this company in August.
A telecom company
BCE (TSX: BCE) is on the other end of the size spectrum. At $43 billion in market value, it’s a sizeable blue-chip company and the largest Canadian telecom company by market cap. It’s also among the most prominent 5G stocks currently trading on the TSX.
This also makes it ideally positioned (along with the other two giants in the country) to take advantage of the upcoming Internet of Things (IoT) revolution, which would rely heavily on the telecom companies in the country.
The company is also a well-established Aristocrat that has raised its payouts for well over a decade. Aristocrats like this tend to offer relatively smaller yields, but the company is currently offering an awesome 8.3% yield, thanks to a sizable dip from which it is currently recovering. The dip lost the company about a third of its valuation.
Foolish takeaway
Both dividend stocks are worth considering right now because they are either going up or plateauing. Instead of giving the current yield a chance to shrink further, investors can consider adding the two high-yield companies to their portfolio and enjoy a solid passive income. Both are raising their payouts continuously, so the income will likely keep growing.
