Retirees: Give Yourself a Raise With These +8% Yielders

Retirees looking for high, sustainable dividends should look at Artis Real Estate Investment Trust (TSX:AX.UN), Aimia Inc. (TSX:AIM), and one other company.

| 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

In a world where GICs yield 1%, 10-year government bonds yield less than 2%, and so-called high-yield stocks yield 4%, it’s tough to be a retiree without a huge nest egg.

The obvious solution is to find higher-yielding stocks–securities that exist in abundance. The problem with that strategy is stretching for yield is viewed as more risky than spending a night surrounded by Zika-infested mosquitoes.

According to naysayers, just about every dividend north of 5% is at risk of getting cut. This not only poses a risk to a retiree’s income; it also means a permanent reduction in capital as the stock collapses in response to the dividend cut.

Luckily for retirees, the reality isn’t so dire. Yes, as a whole, high-yielding stocks are riskier than their lower-yielding counterparts. But that doesn’t mean investors can’t find good companies with sustainable, high dividends. Adding a few of these into an otherwise conventional portfolio can deliver a nice increase in income without much additional risk.

Here are three stocks yielding at least 8% that I think are rock solid.

Artis

Artis Real Estate Investment Trust (TSX:AX.UN) is a diversified real estate company owning office, retail, and industrial space across Canada’s western provinces, Ontario, and in three U.S. states. Altogether the company owns more than 27 million square feet in space spread out over 252 different properties.

Artis shares are cheap from a number of different perspectives. Book value is $18 per share, while shares currently trade hands at just over $13. That’s a discount of nearly 40%. Analysts expect the company to earn $1.30 in adjusted funds from operations in 2016, putting shares at just 10 times that important earnings metric. It’s not often investors find a company trading at such a low P/E ratio that also trades under book value.

Artis pays out a $0.09 per share monthly dividend, which works out to an 8.3% yield. With a projected payout ratio of just 83% for 2016, the dividend sure looks like it’s pretty secure.

Aimia

Aimia Inc. (TSX:AIM) is a marketing company that operates loyalty plans for various businesses. The company is best known for running the Aeroplan loyalty program for Air Canada.

Shares have dropped because of tepid Canadian consumer spending numbers. Management has responded by buying back more than 10% of the company’s total outstanding shares in the last year alone, dropping the share count from 170.8 million to 152.7 million. Despite spending some $250 million buying back shares, the company still has nearly $400 million in cash on the balance sheet.

This bodes well for the company’s 8.8% dividend. Management also gave the payout a vote of support lately by increasing it from $0.19 per share quarterly to $0.20. And finally, management stuck with their guidance that the company would generate between $1.24 and $1.44 per share in free cash flow for 2016, easily enough to cover a $0.80 per share dividend.

Diversified Royalty

The royalty business is an attractive one. In exchange for capital up front, businesses will give a royalty company a gross return of anywhere from 12% to 15%. Even after expenses and taxes, that leaves plenty of profits left over for generous profits for shareholders.

Diversified Royalty Corp. (TSX:DIV) is a smaller company with only three royalty partners. Partners include Mr. Lube, Sutton Real Estate, and the parent company of restaurant brands Original Joes, Elephant & Castle, and State & Main. Together, these three income streams are expected to generate approximately $0.22 per share in distributable income in 2016, enough to cover the $0.018 per share monthly dividend.

As Diversified Royalty acquires more royalty deals, the amount of cash available to distribute will go up. Expenses will stay pretty consistent while revenue goes up. That’s the beauty of this business; the company can continue to grow as long as it can find more royalty deals.

That’s good news for the company’s 9.7% dividend. In fact, investors shouldn’t be surprised if the company increases the payout when it announces its next big royalty deal.

Should you invest $1,000 in Ishares Core Msci All Country World Ex Canada Index Etf right now?

Before you buy stock in Ishares Core Msci All Country World Ex Canada Index Etf, 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 Ishares Core Msci All Country World Ex Canada Index Etf 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.

Fool contributor Nelson Smith has no position in any stocks mentioned.

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 Dividend Stocks

calculate and analyze stock
Dividend Stocks

Here’s How Many Shares of Brookfield Renewable You Should Own to Get $500 in Quarterly Dividends

If you want some dividends on deck, then consider this energy producer, which could provide that and more.

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

Here’s Exactly How $15,000 in a TFSA Could Grow Into $215,000

If you're looking to grow your $15,000 investment into $200,000, here's exactly how to get it done.

Read more »

A worker gives a business presentation.
Dividend Stocks

Navigating Economic Headwinds and Buying the Dip

If you're looking to get in on the markets, but fearful of the market dip, then here's how to navigate…

Read more »

Canadian Dollars bills
Dividend Stocks

A 10% Dividend Stock Paying Cash Every Month

This dividend stock doesn't only offer a massive income, but a variety of investments during this volatile period.

Read more »

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.
Dividend Stocks

Income-generating Stocks That Could Accelerate Your TFSA Growth in 2025

Generate tax-free passive income in your TFSA with these two stocks and grow your wealth.

Read more »

woman looks out at horizon
Dividend Stocks

How I’d Invest $8,500 in Canadian Financial Services to Create a Wealth Legacy

Canada’s financial services sector can help you create a wealth legacy from a less than $10,000 investment.

Read more »

Person holding a smartphone with a stock chart on screen
Dividend Stocks

Is BCE Stock a Buy for its Dividend Yield?

BCE stock looks pretty appealing with a 12% dividend yield, but there's more to consider.

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

TFSA: Invest $15,000 in This TSX Stock and Create $962.55 in Annual Passive Income

If there's one TSX stock to buy right now, it's this long-term hold that's been around for over 100 years!

Read more »