SIA:CC - They Have 8% Yields Today But Are These Stocks Safe for the Long Term?
2023-10-13 20:30:00 ET
The recent market correction has the ball rolling with inflated dividend yields across the board. Right now, the yields of the top TSX dividend stocks have climbed to levels we have not seen since the pandemic-induced market crash in 2020.
With so many top stocks boasting higher-than-usual yields, investors who want to capitalize on them might wonder which assets are worth buying and which warranted the correction, making their yields too risky for wear.
Today, we will look at three TSX stocks with dividend yields higher than 8%. While alarming under usual circumstances, it can be a reasonable dividend yield for fundamentally strong stocks in challenging market environments.
However, we will look closely at them to identify whether they entail too much risk to be long-term investments.
MCAN Mortgage
MCAN Mortgage ( TSX:MKP ) is a $552.81 million market capitalization mortgage investment company headquartered in Toronto. By investing its funds in a portfolio of mortgages, the company aims to generate a reliable income stream.
Deriving most of its revenue through mortgage and equity income, it also invests in other types of loans, including real estate and securitization investments.
As of this writing, it trades for $15.61 per share, boasting a juicy 9.74% dividend yield. Its impressive dividend yield seems attractive, but sustaining such high yields is a different matter.
While it has a long dividend history, it has slashed dividends at least once in the last decade. Without healthy cash flows supporting its payouts, it might not fare well as a long-term investment for dividend income.
Sienna Senior Living
Sienna Senior Living ( TSX:SIA ) is a $773.78 million market capitalization company headquartered in Markham. The company owns and operates an extensive portfolio of senior living residencies while managing several others for third parties. Deriving most of its revenue through its long-term-care (LTC) segment, the company operates solely in Canada.
As of this writing, Sienna Senior Living stock trades for $10.61 per share, boasting an 8.82% dividend yield. Despite macroeconomic issues, the company’s post-pandemic recovery has let it outperform the broader market.
With the demand for its services not going anywhere, its recovery is slated to continue. As the elderly population is expected to triple in the next 25 years, it can be a viable long-term income investment.
NorthWest Healthcare Properties REIT
NorthWest Healthcare Properties REIT ( TSX:NWH.UN ) is a $1.22 billion market capitalization real estate investment trust (REIT) providing investors exposure to a portfolio of high-quality healthcare real estate assets. Diversified across different types and geographically, its portfolio accounts for most of the company’s revenue.
With tenants typically backed by governments, it boasts a high 98% occupancy rate. Its long-term lease agreements have an average length of 14 years. If you are looking for steady cash flow in the long run, NWH REIT appears well positioned to continue paying high-yielding dividends.
As of this writing, it trades for $4.99 per share and boasts a 15.35% annualized dividend yield, which it pays out monthly.
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Foolish takeaway
When investing in dividend stocks during volatile market conditions, it is easy to get carried away if you are not careful.
Granted, higher-yielding dividends seem attractive, but you cannot allocate blindly to just any dividend stock with higher yields. It pays to carefully review the underlying business to identify those that can sustain such payouts.
To this end, MCAN Mortgage stock does not appear to be an asset that can sustain such high-yielding returns in the long run. Due to the nature of the industry they operate in, Sienna Senior Living stock and NorthWest Healthcare Properties REIT appear to be the better of the three long-term dividend stocks to rely on.
The post They Have 8% Yields Today, But Are These Stocks Safe for the Long Term? appeared first on The Motley Fool Canada .
Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends NorthWest Healthcare Properties Real Estate Investment Trust. The Motley Fool has a disclosure policy .
2023