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 Fortis right now?

Before you buy stock in Fortis, 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 Fortis 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

Canadian dollars are printed
Dividend Stocks

How I’d Turn $12,000 in My TFSA Into a Money-Making Machine for Long-Term Growth

With $12,000 spread across high-quality dividend stocks like CNQ and goeasy, you could build a TFSA portfolio that does more…

Read more »

stocks climbing green bull market
Dividend Stocks

A 9% Dividend Stock Paying Cash Every Month, and Perfect in a Volatile Market

It's a volatile time, but this dividend stock can help you through it.

Read more »

Canada day banner background design of flag
Dividend Stocks

Top Canadian Stocks for a $7,000 Investment Today

These Canadian stocks are trading in the green year-to-date and have consistently outperformed the broader markets with their returns.

Read more »

Car, EV, electric vehicle
Dividend Stocks

Carney Cuts the Carbon Tax: What to Do With Your Savings

You can invest in stocks like Alimentation Couche-Tard Inc (TSX:ATD) with your carbon tax savings.

Read more »

dividend growth for passive income
Dividend Stocks

Boost Your 2025 Returns: 4 High-Yield Canadian Dividend Champions

These high-yield dividend stocks have reliable operations and generate significant passive income, making them four of the best to buy…

Read more »

Data center servers IT workers
Dividend Stocks

1 Magnificent Canadian Stock Down 44% as AI Investing Heats up

This Canadian stock not only has growth, but in one of the best growth areas right now.

Read more »

rain rolls off a protective umbrella in a rainstorm
Dividend Stocks

Tariff-Resilient Income: 2 Canadian Dividend Stocks to Weather Economic Uncertainty

Emera (TSX:EMA) and another dividend stock are worth buying despite tariff threats.

Read more »

Dam of hydroelectric power plant in Canadian Rockies
Dividend Stocks

Is Brookfield Renewable Stock a Buy for its 6.7% Dividend Yield?

Brookfield Renewable is a TSX dividend stock that offers shareholders a dividend yield of almost 7% in April 2025.

Read more »