Forget Bitcoin! 2 Top 8%-Yielders for Amassing Profound Retirement Wealth

TransAlta Renewables (TSX:RNW) and one other stock that could turn your $70k TFSA into $1 million.

| More on:

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

Most securities offering yields north of 8% have a tremendous amount of baggage that the investor may end up holding.

Indeed, one has to be careful when hunting for the generous dividend-payers out there, as there are a countless number of firms whose dividend payouts are nothing more than a mirage that may turn into a modest payout that’s a fraction of where it was at when you decided it’d be a good idea to pick up shares for its bountiful income payout.

Like spotting the next big multi-bagger (forget about crypto and Bitcoin), income investors have an equally tough task on their hands when it comes to mega-high-yielders. The higher risk comes with a higher reward. Instead of big capital gains like one could stand to get with high-growth plays, one could stand to lock-in a massive upfront dividend yield that could not only be sustained through decades, but could stand to grow in a way that wouldn’t cause substantial financial stress to the company behind the dividend.

Consider the following three mega-high-yielders that I believe could offer investors a safe, growing +8% yield:

Inovalis REIT (TSX:INO.UN)

Inovalis is a REIT that owns properties across various hotspots in France and Germany. So, if you’re at all worried about the implications from a Canadian housing market meltdown, Inovalis is a REIT option that’ll allow you to sleep comfortably at night.

The main attraction of Inovalis is the REIT’s massive 8.21% distribution yield, which, while seemingly unsustainable or artificially high, is actually sustainable with ample financial wiggle room, opening the door for further potential distribution hikes in the near future.

The REIT generates substantial amounts of FFO, and with the security off a measly 5% from its high, there are pretty high growth expectations for the agile, mid-cap REIT that continues to fire on all cylinders.

TransAlta Renewables (TSX:RNW)

The entire renewable energy sector is riding on a strong multi-year tailwind, thereby allowing firms like TransAlta Renewables to capitalize on lower-risk growth. This lower degree of risk allows TransAlta to stretch its balance sheet much further since forward-looking cash flows are subject to a lower degree of uncertainty relative to unregulated industries where future cash flow projections are less precise.

Most companies in unregulated industries have a bit of fog clouding the growth runways ahead of them. Excessive amounts of debt, which aim to enhance shareholder returns, only serve to compound uncertainty, potentially leading to financially fatal outcomes down the road.

TransAlta Renewables only the other hand has a runway that’s free of fog with more visibility on the road ahead due to the highly regulated nature of the renewable industry. With a minimal amount of debt on the balance sheet, the company can sustain its big dividend (currently yielding 7.8%) despite the stretched triple-digit payout ratio (now at 134.3% on a trailing-12-month basis), while keeping its project pipeline full.

Management knows that cash flows are coming, and this greater visibility allows TransAlta the flexibility to better operate its business with a “tighter” balance sheet.

At just 15 times forward earnings, TransAlta is a low-cost high-yielding bargain that should not be overlooked.

Stay hungry. Stay Foolish.

Just Released! 5 Stocks Under $50 (FREE REPORT)

Motley Fool Canada's market-beating team has just released a brand-new FREE report revealing 5 "dirt cheap" stocks that you can buy today for under $50 a share.

Our team thinks these 5 stocks are critically undervalued, but more importantly, could potentially make Canadian investors who act quickly a fortune.

Don't miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.

Claim your FREE 5-stock report now!

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 Joey Frenette has no position in any of the 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

dividend growth for passive income
Dividend Stocks

Why I’d Invest in Canadian Value Stocks for Both Stability and Growth

Three Canadian value stocks are buying opportunities for investors looking for stability and growth.

Read more »

investment research
Dividend Stocks

Got $15,000? 3 Blue-Chip Stocks Every Canadian Should Consider

Here's why investing in blue-chip TSX stocks such as CNQ and CNR should derive outsized gains in 2025 and beyond.

Read more »

protect, safe, trust
Dividend Stocks

Where I’d Allocate $20,000 in 2 Safer High-Yield Dividend Stocks for Retirement Needs

Here are two safer, high-yield dividend stocks I'm looking at for my retirement needs.

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

3 Reasons I’m Considering Enbridge Stock for a $5,000 Investment This April

I'm considering Enbridge stock to provide some defensive appeal and a juicy dividend to my long-term portfolio.

Read more »

monthly desk calendar
Dividend Stocks

A 9.2% Dividend Stock Paying Cash Every Single Month

With one of the highest dividends out there, this dividend stock deserves attention in your portfolio.

Read more »

Happy golf player walks the course
Dividend Stocks

Build a Powerful Passive Income Portfolio With Just $20,000

If you are worried that the bear market could reduce your savings, these stocks can build a powerful passive income…

Read more »

Hand Protecting Senior Couple
Dividend Stocks

How I’d Use My $7,000 TFSA Contribution to Start Retirement Planning

These TSX stocks have solid fundamentals and are well-positioned to deliver significant tax-free total returns over time.

Read more »

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

How to Turn Your TFSA Into a Gold Mine Starting With Only $10,000

It doesn't have to be complicated or scary. You can turn any portfolio into a major gold mine.

Read more »