This 7.6%-Yielding Dividend Stock Is Growing Safer by the Quarter

 With a yield of 7.6%, this dividend stock is growing more safely in the quarter

Dividend stocks are some of the most popular investments among Canadian investors, and that should come as no surprise. Not only does it allow you to receive income immediately, which helps reduce the risk of your investment, but it also allows you to grow your company and the ability to make significant capital gains.

However, not all dividend stocks are created equal, and like any other stock you buy, they require a lot of research to ensure that the investment is sound and that the stock is safe to buy. That's especially true for high-yielding dividend stocks like energy company Freehold Royalties (TSX:FRU) .

Stocks with high dividend yields can sometimes be a high quality investment and can greatly help increase your passive income. But other times, a high yield can be a red flag and a sign that the company is in trouble or that the dividend could be cut soon.

When stocks are struggling, they often sell off. And if the share price falls and the dividend stays the same, the yield will rise. When investors notice problems, these shares often start to sell off before the company decides to cut the dividend, resulting in a temporary yield that looks extremely high.

Additionally, high dividend yields could be a sign that investors don't expect much growth going forward. If a stock pays out most of its earnings and saves none for growth investments, the dividend may be high today, but the stock may struggle to grow its operations.So it's critical to ensure that any high-yielding dividend stock is still an excellent company, can easily finance the dividend, and has plenty of opportunity for further growth.

And looking at royalties, although the stock now offers a yield of roughly 7.6%, there's no doubt that it's an impressive investment.Freehold Royalties is one of the best dividend stocks in CanadaFirst, when researching any company, it's essential to understand how they make money. In the case of Freehold, it owns land that other energy companies use to produce oil and gas in exchange for royalties.

This makes it an ideal business for passive income seekers. It generates tons of cash flow all the time and has essentially no capital expenditure obligations for maintenance. This means that any cash flow it earns can be used to either fund the dividend or invest in acquiring more land and expanding its portfolio. And in 2023, when Freehold pays dividends of $1.08 per share, analysts expect the stock to earn about $1.59 in free cash flow per share, giving it a payout ratio of just 68%.

Additionally, Freehold has just over $150 million in net debt and net debt to earnings before interest, taxes, depreciation and amortization (EBITDA) is only 0.5 times. That's minimal debt considering its market cap is more than $2.1 billion, and assuming no acquisitions or dividend increases, Freehold should be able to generate enough free cash flow to cover its net debt by end of next year.

So Freehold's already safe dividend is getting safer every quarter as its net debt is reduced. So, if you're looking for a reliable, high-yielding dividend stock to help you grow your passive income, Freehold Royalties is one of the best stocks to consider today. The post This 7.6% Yield Dividend Stock Grows Safer Since Quarter appeared first on The Motley Fool Canada.

Should you invest $1,000 in Freehold Royalties Ltd.?

Before you consider Freehold Royalties Ltd., you'll want to hear this.Our team of market-beating analysts have just revealed the top 5 stocks for investors to buy in July 2023 and Freehold Royalties Ltd. was not on the list.Motley Fool Stock Advisor Canada, an online investment service they've been running for nearly a decade, is beating the TSX by 29 percentage points. And right now, he thinks there are 5 stocks that are better to buy.

In the world of investing, the allure of high-yielding dividend stocks often comes with a fair share of risk. However, there are rare cases where a dividend stock not only offers an impressive yield, but also gradually becomes safer. In this article, we delve into the interesting story of a dividend stock boasting a remarkable 7.6% yield that continues to grow more securely with each passing quarter.

Understanding the appeal of high-yielding dividend stocks:

Investors looking for steady income often find high-yielding dividend stocks attractive. A robust dividend payout can provide a reliable stream of income, making these stocks especially attractive in uncertain economic times.Introducing dividend stocks with a yield of 7.6%:At the heart of our analysis is the dividend stock, which boasts a remarkable yield of 7.6%, attracting the attention of income-focused investors. Aside from the impressive yield, what really sets this stock apart is its commitment to increasing security for its investors.

Quarterly Improvements: A Safer Bet:

One of the outstanding features of this dividend stock is its consistent effort to strengthen its financial base. Quarterly, the company takes measures to reduce its debt load, increase its cash reserves and diversify its income. This calculated approach means a proactive attitude to ensure the sustainability of dividend payments.

The importance of dividend sustainability:

Investors understand that a high dividend yield is only beneficial if it is sustainable over the long term. Many companies face the challenge of maintaining dividend payments during an economic downturn. However, our highlighted strategic actions are aimed at mitigating this risk.

Diversification for stability:

A key strategy in strengthening the safety profile of the population is diversification. By expanding its product lines and entering new markets, the company reduces its dependence on a single source of income. This diversification not only protects the company from fluctuations in individual industries, but also contributes to the steady growth of its dividends.

Safer High Yield Dividend Stock:

In a world where high-yielding dividend stocks can be a risky venture, the spotlight is on the exceptional case of a 7.6%-yielding dividend stock that is gradually increasing its safety measures. With diligent debt reduction, enhanced cash reserves and strategic income diversification, this stock is solidifying its position as a safe choice for income-oriented investors.

As always, investors are advised to do their due diligence and seek professional financial advice before making an investment decision. With its continued commitment to growth and safety, the 7.6% dividend stock offers an interesting opportunity for those looking to balance income generation with prudent investing.

This article is for informational purposes only and should not be considered investment advice. The performance of the mentioned stock may be subject to market risks and readers are advised to do their own research before making any investment decision.