3 Hidden Yields Paying Up to 9.1%

These stocks pay out 5.1%… 5.4%… even 9.1%.

| More on:
The Motley Fool

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

By using this simple indicator I have been able to identify companies with yields of 5.1%… 5.4%… even 9.1%.

These are solid, blue-chip companies. Many are household names that I’m sure you’re familiar with.

However, you will never see these payouts posted on Yahoo! Finance. In fact most investors have never heard of this metric.

Most brokerage and investment websites don’t look past the standard payout. They simply take a company’s most recent dividend and multiply it by the payment frequency to calculate a stock’s annual dividend. That means the figure investors see often vastly underestimates the true annual yield of the stock.

To get a true sense of how well a company rewards its investors, you have to dig deeper. That’s why more and more analysts are using a metric called shareholders’ yield. In contrast to the standard dividend yield, shareholders’ yield adds together the dollar value of all cash distributions, shares repurchased, and debt repaid.

In other words, shareholders’ yield gives you the only true picture of how much cash a company is returning to its owners. Case in point, check out some of the firms below.

Company Dividend Yield Shareholders’ Yield
Suncor Energy 2.20% 5.09%
Tim Horton’s 2.15% 5.41%
Agrium 3.33% 9.10%

Source: Google Finance

Let’s consider Canada’s favourite coffee chain Tim Hortons (TSX: THI)(NYSE: THI). The company has paid a dividend every quarter since its initial public offering in 2006. Just as important, Tim’s has a good track record of increasing those distributions, which are up 260% over the past five years.

However, if you checked a popular financial website like Yahoo! Finance, you will see that the stock yields a measly 2.2% today. That’s OK, but not high enough to get us income investors excited.

There’s only one problem with this figure: it doesn’t reflect how much cash the company has actually returned to shareholders. Tim Hortons has a great tradition of buying back stock. Over the past decade the company has repurchased over a quarter of its outstanding shares. To not account for this would be a grave oversight.

Over the past year alone, Tim’s has been taking advantage of today’s ultra low interest rates to fund its buyback program repurchasing over $720 million of its own shares. Once you make the needed adjustments to the stock’s stated payout, you discover the Tim Hortons true yield is over 5.4%!

Suncor Energy (TSX: SU)(NYSE: SU) is another hidden ‘yielder’. Its posted dividend payout is only a measly 2.2%. Once again, that’s barely enough to deserve a passing glance from yield hungry investors.

However, new Chief Executive Steve Williams is on a mission to return as much cash to shareholders as possible. Since 2011, management has repurchased over 11% of the company’s outstanding shares and has paid off $1.5 billion in debt. After taking this into account, the stock yields a respectable 5.1%.

Finally, Agrium (TSX: AGU)(NYSE: AGU) has always been a dividend investor favourite. With its 3.3% payout, the stock already boasts a hearty yield. However, once you dig deeper into the financial statements, you discover that the company has been aggressively buying back shares and paying off debt. Once this is accounted for the stock suddenly yields a remarkable 9.1%!

The bottom line: Look beyond the stated payout published on most financial websites. By factoring in share buybacks, you can reveal some of the market’s hidden yields.

Should you invest $1,000 in Suncor Energy right now?

Before you buy stock in Suncor Energy, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Suncor Energy wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $20,697.16!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 29 percentage points since 2013*.

See the Top Stocks * Returns as of 3/20/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Investing

golden sunset in crude oil refinery with pipeline system
Energy Stocks

TC Energy: Buy, Sell, or Hold in 2025?

TC Energy is up 30% in the past year. Are more gains on the way?

Read more »

protect, safe, trust
Investing

Stock Market Correction: 1 Safe-Haven Stock for TFSA Stability and Future Appreciation

Fortis (TSX:FTS) stock could be a great way to ride out more tariff volatility in April 2025.

Read more »

analyze data
Dividend Stocks

How I’d Invest $28,000 in Canadian Natural Resource Stock to Amass Personal Wealth

Investing in TSX dividend stocks such as Enbridge can help you earn a passive-income stream in 2025.

Read more »

hand stacks coins
Dividend Stocks

Got $400? How I’d Start Building Income With 3 High-Yield Stocks for the Long Term

These high-yield dividend stocks have a solid payout history, making them compelling investments to generate passive income.

Read more »

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Friday, April 4

With broad-based commodity weakness continuing and no resolution in sight on the trade front, the TSX could extend its decline…

Read more »

Canada day banner background design of flag
Tech Stocks

The Top Canadian Stock to Buy With $5,000 in 2025

There are few Canadian stocks out there that offer the outlook of this tech stock, bound for more growth.

Read more »

A close up color image of a small green plant sprouting out of a pile of Canadian dollar coins "loonies."
Dividend Stocks

I’d Put $15,000 in These 3 Dividend-Growth Champions for Increasing Income Potential

Want to offset some volatility? Here are three defensive dividend-growth champions that can generate a juicy yield right now.

Read more »

Cannabis business and marijuana industry concept as the shadow of a dollar sign on a group of leaves
Stocks for Beginners

Buy the Dip Before It’s Too Late: This Canadian Stock Won’t Stay Cheap Forever

Investors might think that cannabis stocks are out, but this one could be the top Canadian stock to consider.

Read more »