3 Top High-Yield Financial Stocks to Buy in September

It can be hard to find good dividend-yielding stocks when the broader market is approaching all-time highs, and S&P 500′The yield is 1.2%. But don’t give up – just look harder.

If you do, you’ll find gems like Bank of Nova Scotia (NBS -0.26%)with a yield of 6.2%; WP Carey (WPC 1.24%)which gives 5.8%; and EPR properties (EPR -0.80%)with a whopping 7.2% dividend yield. Here’s a quick look at each of these attractive high yielding producers.

1. Bank of Nova Scotia just upped its game

Bank of Nova Scotia, commonly called Scotiabank, took an unusual approach to growth, focusing on expansion in South America at a time when its Canadian peers were expanding in the United States. This has not worked out as hoped, with Scotiabank lagging behind competitors on key metrics (such as earnings growth), largely due to its exposure to the emerging economies of South America.

Its Canadian operation remains large and quite well positioned. Investors aren’t happy, however, and the stock is deeply depressed, yielding a well-above-average 6.2%. For reference, the average bank yield is around 2.5%.

The Bank of Nova Scotia is not ignoring the problem. It established a plan to exit the less desirable markets (Colombia) while focusing on the most desirable (Mexico). It will also expand its position in the United States, with the goal of creating a North American banking giant (with a business that stretches from Canada to Mexico).

And it’s already executing on that plan, recently announcing a deal to buy nearly 15 percent of the KeyCorp. The investment is expected to generate earnings very quickly and opens up exciting possibilities for the future, although there is no guarantee that a merger is on the cards.

To be fair, this is still a turnaround story, but if you think decades ahead, Scotiabank is worth a closer look for dividend investors. Notably, the bank has paid a dividend every year for over 150 years!

2. WP Carey has hit the reset button and is already back to dividend growth

To get the bad news out of the way right up front, WP Carey was on the verge of 25 years of dividend growth, and it… cut its dividend. But here’s the interesting thing: the dividend started growing again in the very next quarter.

So what’s really going on with this real estate investment trust (REIT) that has an attractive 5.8% yield? Don’t think of this as a dividend cut; Think of it as a business reset.

When it comes to REITs, WP Carey is one of the most diversified companies you’ll find, with assets in warehouses, industrials, retail and a large “other” category. It also has properties in Europe, adding to the geographic diversification.

What is missing now is the office exposure he has reduced to almost zero. The dividend cut came as WP Carey decided it needed to move faster on the office reduction front due to headwinds facing the property niche. In about a year, office exposure fell from 16% to almost zero (the final sale of offices should take place by the end of 2024). The dividend cut reflects the quick exit from office.

Other than that, nothing material has changed in how WP Carey works. If you dismissed this high-yielding REIT because of its dividend cut, you may want to give it a second chance.

3. EPR Properties is back on solid ground

So far, all these high-yield financial stocks have some warts. But EPR Properties, a REIT that focuses on holding experiential assets, probably has the biggest.

From a long-term perspective, this is an attractive niche. But in 2020, when the coronavirus pandemic raged, it was a terrible accent. EPR Properties ended up cutting its dividend to ensure it survived the pressures its tenants were facing. The world has since learned to live with COVID and EPR Properties is back on solid ground.

In particular, EPR’s dividend has started to rise again. And perhaps more importantly, the adjusted funds from operations (FFO) payout ratio in the second quarter was 70% or so. Also interesting is that the company’s rental coverage is now higher than it was even before the 2019 pandemic.

There are still some lingering issues to address, including reducing the REIT’s exposure to movie theaters (a too-high 37% of rents). But EPR is indeed operating from a position of strength right now, a fact that Wall Street doesn’t seem ready to give it credit for.

There are always compromises

You may have noticed the theme here. Scotiabank, WP Carey and EPR Properties have high yields and businesses with few warts. Investing is about balancing risk and reward, and when it comes to high returns, you often have to be willing to accept some warts.

The key thing here, though, is that each of these high-yielding stocks is financially strong and a good business. Yes, they’re working against short-term headwinds, but it looks like they’ll pull through, continuing to reward income investors very well.