The effects of the Brexit are still being felt by Canadian investors.
The TSX Composite Index has surged past where is was pre-Brexit, shrugging off an event that didn’t matter to Canadian stocks whatsoever, exactly how I predicted. This rally has been mostly led by our largest blue-chip stocks as investors crowd into the safe-dividend trade.
Here’s why.
As a reaction to the Brexit, investors moved from riskier assets into so-called safe havens. Not only did this drive up the price of government bonds and the U.S. dollar, but it also drove up the price of many dividend stocks.
This has made the quest for yield–which was already challenging–into something much more difficult. Finding stocks with high yields and sustainable payouts is easier said than done.
Not all is dire for retirees looking to get a little more income, however. Here are three stocks that offer safe and secure yields of more than 7%.
Northview
Northview Apartment REIT (TSX:NVU.UN) has quietly become one of Canada’s largest apartment owners with a portfolio of more than 24,000 suites in 60 markets across eight different provinces. The company is also expanding into managing suites and hotels that cater to short- to medium-term stays.
The company has several different ways it can continue to grow. Acquiring more apartment blocks is a given, especially in markets like Toronto and Montreal. It also plans to do renovations to existing units and then raise rents when finished. When this renovation program is completed, management estimates funds per operations will increase by $0.29 per share.
Northview pays an attractive 7.3% dividend yield, which translates into a $0.1358 per share payout every month. It’s a sustainable dividend with a payout ratio of 67% of 2016’s estimated adjusted funds from operations.
Canadian Apartment Properties REIT (TSX:CAR.UN), a competitor, has a 69% payout ratio and a 3.7% current yield. That’s less than half the dividend yield Northview is offering with a similar payout ratio.
Aimia
Aimia Inc. (TSX:AIM) is best known for running the Aeroplan customer loyalty program for Air Canada. It also runs various other loyalty programs across the world, including Nectar in the U.K. and Air Miles Middle East.
Aimia shares have been terrible performers of late, falling more than 44% over the last year. This weakness is primarily attributed to weakness in the Canadian consumer, which just isn’t spending as aggressively as before. As a result of this weakness, Aeroplan miles given out by the company have been flat to slightly down year over year.
But Aimia is still a proven money maker. According to company estimates, 2016’s free cash flow is projected to be $1.25-1.44 per share. Not only is that an incredibly cheap valuation for a company trading under $8 per share, but it also ensures the $0.80 annual dividend is safe.
Aimia shares currently yield an eye-popping 10.1%.
Brookfield Real Estate
Brookfield Real Estate Services Inc. (TSX:BRE) is the owner of both the Royal LePage and Via Capitale real estate brands, which collectively have more than 17,000 realtors operating out of more than 660 different locations.
The company is riding the strong real estate markets in Vancouver and Toronto–among other cities–to record results. Cash flow from operations hit $28.9 million in 2015, which encouraged management to hike the dividend twice. And 2016 dividends are on pace to hit $1.30 per share, a yield of 8.7%.
Many folks are concerned about a possible Canadian housing bubble. The company points to factors like low interest rates and the decline in the Canadian dollar as positives for the market. Still, Brookfield has taken steps to help stabilize income in case the market does collapse by moving towards a fixed-price model compared to one where it gets paid per transaction.
