Is This 10.8% Dividend Yield a Bargain or Too Good to Be True?

There are some high-yielding dividend stocks out there right now. But there aren’t many higher than Slate Office REIT (TSX:SOT.UN).

The real estate investment trust (REIT) is still paying its shareholders $0.0333 every month. And with its share price at $3.71 as of the end of Friday, the stock’s yielding 10.8% per year. It’s an astronomical payout and one that investors should be thinking twice about.

Although the company reported that it collected 97% of its rents in April, there’s still a fair bit of a risk for a stock that has a portfolio full of office properties.

The longer the pandemic lasts, the more businesses that will shut down and the fewer offices that will be around. And so while things are okay for now for Slate, I wouldn’t be as convinced that its future will be nearly as stable.

As tempting as it may be to invest in Slate and get a great yield, there’s just a bit too much risk right now to consider hanging on to the stock for a long period.

It’s too early to gauge the health of Slate’s operations and investors may want to wait at least another quarter or two before making that assessment. There’s nothing worse than owning a dividend stock that gets cut, as many investors have already learned this year.

Year to date, shares of Slate are down 36%. And a poor result or a sign that tenants are struggling to pay rent could send the stock down even lower.