Written by Christopher Liew, CFA at The Motley Fool Canada
Dividend stocks are excellent sources of income for passive or laid-back investors and retirees. You can further secure your financial future by reinvesting the dividends until the principal grows to a hefty nest egg. However, the dividend yield is a bone of contention for income investors.
Historically, the average yield of Canadian dividend-paying stocks is between 4% and 4.5%, reasonably decent and attractive to dividend earners. Some dividend stocks pay double or even triple the amount. Unfortunately, you could enter high-risk territory if the yield is way over the market average.
Interestingly, Wall Financial Corporation (TSX:WFC) stands out heading into the last quarter of 2023. Besides its off-the-charts 15.78% yield, the real estate stock is outperforming the TSX year to date, +66.43% versus +0.81%. At $19.18 per share, you can earn two ways, from price appreciation and dividend payments.
Wall Financial is nearly 55 years old and adept in acquiring, developing, and managing residential and commercial income-producing properties. It also develops and sells single and multi-family housing while developing and managing hotel properties.
The $621.6 million real estate investment and development company focuses on Greater Vancouver where it constructs high-quality homes and commercial spaces to meet the area’s expanding needs. Besides owning a pair of hotels that add vibrancy to the community, some of Wall Financial’s investments go to preserving historic cultural institutions and buildings.
In fiscal 2023 (12 months ended January 31, 2023), net earnings and comprehensive income attributable to shareholders soared 229.9% to $48.2 million versus fiscal 2022 due to improved hotel operations and the sale of an investment property. Moreover, revenue and income from the rental apartment operations were stable.
But for the first half of fiscal 2024 (six months ended July 31, 2023), net earnings and comprehensive income attributable to shareholders decreased 69.7% year over year to $11.9 million. The dramatic drop in income has had a minimal effect on the stock.
The silver linings include increased income from rental apartment operations due to the investment properties acquired last year, decreased vacancy rates, and increased rents on tenant turnover. Wall’s hotels continue to enjoy higher occupancy and average daily rates. The only drawback was the decrease in development operations after closing condominium units in the prior period.
Potential dividend earnings
Given Wall Financial’s current share price and dividend yield, the annual dividend per share is a lucrative $3.03. Owning 1,000 shares will produce $3,026 in passive income in one year.
Assuming you’re investing for the long term, your $19,180 investment will grow to $83,025.25 in 10 years, including reinvesting annual dividend payments. At year-end 2022, the share price was $13.25 but had you invested $13,125 (1,000 shares), your money would be worth $19,180 today, excluding dividends.
Unspecified payout frequency
Declaring and paying dividends is usually at the discretion of the Board of Directors. As of October 2, 2023, Wall Financial has no future or upcoming dividend announcements. Its most recent payout ($3 per share) was on February 16, 2023.
Starting in March 2013, the payout frequency has become unspecified from semi-annual. While the real estate stock boasts market-beating returns thus far in 2023, Wall Financial did not pay dividends in 2015, 2020, 2021, or 2022. Payouts have been mainly once a year since 2014.
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