Are you looking for a high dividend stock that can provide you with at least $100 per month in passive income?
If so, you’re in luck.
The TSX is replete with high yield stocks that can stuff your account with cash, and if you hold such stocks in a TFSA, you pay no taxes on them.
With that said, not all stocks pay monthly dividends. Most pay quarterly. To find a high yield stock that pays monthly and is also a good investment would normally take some digging. Fortunately, I’ve found a monthly pay stock idea that might just be worth it. In this article, I’ll share it with you.
First National
First National Financial (TSX:FN) is a Canadian non-bank lender. Its shares cost $40.33 and pay a $0.204167 monthly dividend. That’s $2.45 per year. So, the yield is approximately 6.07%.
In order to get $100 per month from a stock yielding 6.07%, you need to invest $19,769. If you are 33 or older and have never made a TFSA contribution before, that’s less than 25% of the sum you can invest in 2024 ($95,000). Here’s the math on how $19,769 invested at 6.07% yields $1,200 per year, or $100 per month:
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| First National Financial | $40.33 | 490 | $0.204167 per month ($2.45 per year) | $100.042 per month ($1,200.50 per year) | Monthly |
As you can see, First National’s dividend will provide $100 per month if you invest $19,769 in it. The question is, will that dividend actually keep coming in?
Industry and company health
Whether First National can keep paying its dividend depends on industry and company-specific factors.
FN is a lender, and interest rates are coming down, so that’s one factor that argues the dividend will have to be cut. On the other hand, First National is a well run company with sensible lending standards. Although it does lend money to Canadians who are ineligible for bank loans, it mainly seeks out borrowers who are excluded from financing for demographic characteristics, not truly poor credit. Also, the company is very profitable, with a 32.6% net income margin. On the whole, things are looking good here.
Dividend coverage
One indicator that First National’s dividend will continue being paid on time is the fact that the dividend is well covered by the company’s earnings. First National has a 64% payout ratio, which indicates that the company could see its earnings decline 30% and still keep paying its dividend.
Future prospects
As we’ve seen, First National stock has a high yield that is well supported by earnings. That’s heartening. The real question is, where will things go from here? The Bank of Canada is in the midst of cutting interest rates. It has cut rates three times this year, and is expected to cut once more at its meeting today. There is a possibility of FN’s earnings declining because of this. However, the company’s payout ratio is modest enough that a dividend cut appears unlikely.
