A discount, if it stems from benign reasons like a weak market or sector, can make a dividend stock quite appealing. It increases the yield and allows you to take advantage of the recovery-based returns. Additionally, if you already have such stocks in your portfolio, you can improve the overall yield by doubling up on them when they are discounted.
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A mortgage company
MCAN Mortgage (TSX: MKP) is a relatively small mortgage company with a small-cap stock. The company primarily caters to residential customers and offers a range of custom mortgage solutions. While it’s usually considered for its dividends, the stock also experienced a decent bull run in 2024 and rose by about 17%. However, the trajectory has shifted.
The stock has recently taken a nose-dive and has fallen over 5% in a little over a week. This has pushed the yield slightly, but if the trend continues, the yield might be significantly beefed up. It currently stands at 8.3%, which is already a mouthwatering number. Other endorsements for this stock’s dividends are its rock-solid payout ratio and healthy payout history.
A royalties company
Energy stocks aren’t having the best of times right now, and this applies to non-conventional energy companies like Freehold Royalties (TSX: FRU). The company has a portfolio of mainly energy and, to a lesser extent, mineral properties in North America, including 6.1 million gross acres in Canada and 1.2 million gross drilling acres in the United States. The portfolio leans heavily towards oil.
This is one reason the stock has experienced a slump and has fallen over 11.8% from its yearly peak. This has made the stock attractive on two fronts—valuation and yield. It’s trading at a price-to-earnings ratio of 14.9 and offering a juicy yield of around 8.2%. The payout ratio of the stock is not very healthy per se, but compared to this ratio in the past years, it’s relatively stable.
A manufacturing company
Markham-based Exco Technologies (TSX: XTC) offers innovative technologies and solutions to two industries: die-cast and automotive manufacturers. The company portfolio includes several brands specializing in automotive protection and storage, trim, tooling solutions, etc.
The stock had a decent year but started falling in the last few months. Currently, it’s trading at an 11% discount from its yearly peak. This has augmented its yield by a small margin and pushed it to 5.3%. The payout ratio is relatively healthy as well. Also, the company has recently posted solid earnings, indicating the financial viability of its dividends.
Foolish takeaway
The three stocks offer healthy dividends and solid yields. Solid financial numbers and payout ratios back the dividends of the two companies, and all three have relatively stable dividend histories. Adding to your existing pool of these stocks can help you enhance the potential of your passive-income portfolio.
