This Monthly Income Machine Yields 6.6% and Looks Like a Steal!

Are you looking for high yield monthly pay dividend stocks?

If so, I have some bad news:

Many such stocks are low quality. While real estate investment trusts (REITs) are legit, other monthly payers aren’t. In particular, I’ve found that many of them are low quality energy names – I suspect they’re offering monthly payouts as a gimmick to attract investors.

However, I have found one monthly pay stock, which I’ve been researching on and off for over a year, to be pretty good. It’s a little-known mortgage lender whose shares are cheaper and higher yielding than the Big Six banks. It has a whopping 6.6% dividend yield, and pays its dividends every month. In the ensuing paragraphs, I will explore this stock in detail, so you can decide whether it’s a good fit for your portfolio.

First National: A monthly pay dividend champ

First National Financial (TSX:FN) is a Canadian non-bank mortgage lender. It’s considered a “non-bank lender” because it does not take deposits to finance its mortgage portfolio. Instead, it issues long-term bonds to come up with money. This way, it doesn’t have to worry about “runs on the bank” or other liquidity issues that arise with normal banks from time to time.

Another difference between First National and other banks is that it doesn’t have branches. Instead, it partners with mortgage brokers to find borrowers to lend to. It specializes in lending money to creditworthy people who are nevertheless usually rejected by the banks. These include self-employed people, gig workers, and retirees living on pension income. Such borrowers often have high credit scores but banks don’t want to deal with them because they have characteristics that banks see as “red flags.” First National is very skilled at helping them secure financing.

High yield and monthly pay dividends

A big attraction with FN stock is its high and regular dividends. The dividend is $0.208334 per month, or $2.50 per year. At yesterday’s closing price of $37.93, these dividends provide a 6.6% yield. If you invest $100,000 in the stock, you get $6,590 in annual dividend income, or $549.16 per month. Here’s how the math on that works:

A cheap valuation

Apart from its high yield and monthly pay dividend schedule, another thing that FN stock has going for it is a cheap valuation. At yesterday’s closing price, the stock traded at 10.9 times earnings, 3.4 times sales, and 3.66 times book. These multiples are lower than average for TSX banks.

Decent performance

Another thing that First National has going for it is decent operating performance. The company has a 27.3% net margin and a 27% return on equity. It has compounded its revenue at 8% per year and its earnings at 9.5% per year over the last 10 years. This year, the growth hit a bit of a snag: revenue declined 16% in the trailing 12-month period. This is simply due to the fact that interest rates hit multi-decade highs in 2022 and 2023, making growth in 2024 and early 2025 difficult. Revenue and earnings should normalize in the months ahead.

Foolish takeaway

First National Financial is a monthly pay dividend stock that seems to have it all. It’s cheap, it has a high yield, it’s ultra-profitable, and it’s a long-term grower. I’d say it would make for a decent investment.