Mortgage Choice Limited: The market's most overlooked dividend stock 

If you're looking for yield, Mortgage Choice Limited (ASX:MOC) is a great addition to your portfolio. 

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The half-year earnings avalanche has well and truly begun for the roughly 2,000 companies listed on the ASX. Among the most closely watched results so far have been those from the big banks and telecommunications providers.

There is no secret as to why this is the case. In an environment when the official cash rate set by the Reserve Bank of Australia (RBA) is 2.25% and likely to fall further, self-funded retirees relying on the income from their term deposits are being forced to seek alternatives.

This hunt for yield has seen the price of stocks like the Commonwealth Bank of Australia (ASX: CBA) and Telstra Corporation Ltd (ASX: TLS) bid up to record highs.

Behind the headlines

For those willing to stray beyond the predictable headline makers of the financial press, there are compelling rewards on offer.

The low interest rate environment may be painful for term deposit holders, but it is unquestionably helpful for first home buyers and mortgage holders. In fact, building and home loan approvals are at levels not seen since the global financial crisis.

Obviously, the banks benefit from increased mortgage lending, and that is why the share prices of these stocks have skyrocketed as interest rates have fallen. But there's an overlooked mid-cap dividend star exposed to the housing market which is still available for relatively good value.

Mortgage Choice Limited (ASX: MOC) benefits from the competition between the big banks for mortgages. The banks pay Mortgage Choice a commission for every loan it originates on behalf of the bank. This payment comes out of the bank's share of the profits from the loan.

Better still, Mortgage Choice earns stable, predictable, boring and beautiful recurring income from the bank over the life of the loan as borrowers repay their mortgage.

That makes its dividend virtually bulletproof, as you can see for yourself if you look at its payout history.

A stronger housing market bodes well for a dividend surprise when the company declares its results later this month.

Assuming that the company's next three scheduled payments will be in line with its last three payments gives a yield of around 7.5%, or above 10% when franking credits are taken into account.

Motley Fool contributor Ry Padarath owns Mortgage Choice Limited shares

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