Dividend Investors: 3 High-Yield Stocks for Your TFSA Income Portfolio

Here’s why Power Financial (TSX:PWF) and another two Canadian companies might be interesting TFSA picks today.

| More on:

The recovery in the equity market to start 2019 has wiped out some of the best bargains, but a number of top Canadian stocks still trade at depressed levels and some offer attractive dividends right now.

Let’s take a look at three stocks that might be interesting picks today for an income-focused TFSA portfolio.

Power Financial (TSX:PWF)

Power Financial trades at $26.50 per share compared to $34 at this time last year. The entire financial sector had a rough ride through the end of 2018. While the banks have picked up a nice tailwind, some of the other players in the sector remain depressed.

Power Financial is a holding company with Canadian interests that include a number of insurance and wealth management businesses. It is also part owner of a European holding company that owns stakes in a basket of the continent’s top global companies.

The company raised the dividend last year and another increase should be in the way in 2019. Power Financial reported solid Q3 2018 results. Adjusted net earnings came in at $0.81 per share, compared to $0.65 in the same period in 2017.

At the time of writing, the dividend provides a yield of 6.5%.

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM)

CIBC is back up to $110 per share from the December low near $100, but it’s still well off the 2018 high around $124.

The bank is generally considered to be a higher risk investment compared to its larger peers due to a heavy exposure to the Canadian housing market. It’s true that a meltdown in house prices would be negative, but the likely outcome is a soft landing and CIBC is adequately capitalized to ride out any shocks.

CIBC has improved the diversification of the revenue stream through a US$5 billion acquisition in the United States. The purchase of PrivateBancorp helps hedge against potential trouble in Canada, and management has indicated that additional deals south of the border could be on the table, especially in the wealth management segment.

CIBC has a strong track record of divided growth, which should continue. The company is very profitable, and while it slightly missed earnings expectations in fiscal Q4 2018, the numbers are still solid.

At less than 10 time trailing earnings and the current dividend provides a yield of 4.9%, the stock appears cheap.

A and W Revenue Royalties Income Fund (TSX:AW.UN)

The tasty burgers and famous root beer continue to draw customers of all ages, and A&W has done a good job of marketing itself as a healthy player in the burger space. Advertisements boasting the products are not raised using antibiotics or steroids might not seem like a great way to bring people in the door, but the strategy has worked.

Royalty income rose 18% in Q3 2018 compared to the same period in the previous year, supported by a 13% increase in same store sales. The company raised the monthly dividend from $0.141 to $0.143 per unit.

More gains should be on the way, as the company plans to add new stores and the trailing 12-month payout ratio fell to 92.7%, compared to 97.4% in Q3 2017.

The current distribution provides a yield of 4.8%.

The bottom line

Power Financial, CIBC, and A&W all pay growing distributions that offer above-average yield. The stocks are off their December lows, but still appear attractively priced.

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 Andrew Walker has no position in any stock mentioned.

More on Dividend Stocks

hand stacks coins
Dividend Stocks

3 Ultra-High-Yield Dividend Stocks You Can Buy and Hold for a Decade

These three high-yield dividend stocks still have some work to do, but each are in steady areas that are only…

Read more »

senior man and woman stretch their legs on yoga mats outside
Dividend Stocks

TFSA: 2 Canadian Stocks to Buy and Hold Forever

Here are 2 TFSA-worthy Canadian stocks. Which one is a good buy for your TFSA today?

Read more »

calculate and analyze stock
Dividend Stocks

This 5.5% Dividend Stock Pays Cash Every Single Month!

This REIT may offer monthly dividends, but don't forget about the potential returns in the growth industry its involved with.

Read more »

Silver coins fall into a piggy bank.
Dividend Stocks

How to Use Your TFSA to Earn up to $6,000 Per Year in Tax-Free Passive Income

A high return doesn't mean you have to make a high investment -- or a risky one -- especially with…

Read more »

path road success business
Dividend Stocks

2 High-Yield Dividend Stocks to Buy Hand Over Fist and 1 to Avoid

High yields are great and all, but only if returns come with them. And while two of these might, another…

Read more »

Man holds Canadian dollars in differing amounts
Dividend Stocks

This 7% Dividend Stock Pays Cash Every Month

A high dividend yield isn't everything. But when it pays out each month and offers this stability, it's worth considering!

Read more »

young people stare at smartphones
Dividend Stocks

GST/HST “Vacation”: Everything Canadians Need to Know

The GST/HST "vacation" is a little treat for the holidays, along with a $250 payment. What should you do with…

Read more »

Train cars pass over trestle bridge in the mountains
Dividend Stocks

Is CNR Stock a Buy, Sell, or Hold for 2025?

Can CNR stock continue its long-term outperformance into 2025 and beyond? Let's explore whether now is a good time to…

Read more »