Is This 8.6% Yield the Best Dividend Stock to Buy Right Now?

Many dividend stocks are struggling this year as once-stable industries are not doing well amid the coronavirus pandemic. But that doesn’t mean they’re all doomed, and while some dividend stocks have cut or suspended their payouts this year, others haven’t.

And because many dividend stocks are down in 2020, that’s pushed their yields up. One, in particular, yielding 8.6% that is looking especially attractive right now is Extendicare Inc (TSX:EXE)

The Ontario-based company operates long-term care homes and retirement communities in the country. It’s an important function, especially as many Baby Boomers are retiring and the need for senior care is only going to continue rising.

That’s why demand for its services is likely to continue to be strong. Extendicare currently pays a monthly dividend of $0.04, which is high given that its share price finished last week at just $5.59. On a $10,000 investment, it would generate $860 in recurring income every year.

A big part of the reason for that high dividend yield is because Extendicare’s stock fell off a cliff back in the March market crash that it still hasn’t recovered from. Down 35% this year, you’d have to go back to 2013 for the last time the stock was trading at the levels that it’s hit this year.

However, it’s not a risk-free investment option as in its second-quarter results, the company noted that it incurred $20 million worth of operating expenses related to the pandemic this year. And with no end in sight to COVID-19, it’s going to remain a challenge for Extendicare.

There’s lot of potential here if the company can continue to weather the storm, but this a stock investors should keep a close eye on because if things get worse, the dividend may be in jeopardy.