2 High-Yield Dividend Stocks to Buy as They Bounce

Two high-yield but underperforming dividend stocks are viable options for income-focused investors.

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North American stocks have been under pressure lately due to fears of a recession in the United States. As the TSX spikes and dips because of the headwinds, some high-yield dividend stocks bounce along with the market.

Laurentian Bank (TSX:LB) and Polaris Renewable Energy (TSX:PIF) underperform but are attractive options for income-oriented investors. The former pays a mouth-watering 7.33% dividend, while the latter yields 6.83%. The respective businesses have inherent risks, although there are compelling reasons to buy either stock to include in your investment portfolio.

Renewed strategic plan

Laurentian Bank launched a strategic plan in 2021 and completed a strategic review in 2023. Many thought a post-review would lead to a sale. Bank of Nova Scotia (TSX:BNS) was a potential buyer, but reports say the big bank backed out. The $1.12 billion bank is no longer on the selling block due to a lack of interested buyers.

Through its president and chief executive officer (CEO) Eric Provost, the bank unveiled a revamped strategic plan on May 31, 2024, along with the presentation of the second-quarter (Q2) fiscal 2024 results. He said the plan will position Laurentian Bank for future growth as an even stronger bank.

In the three months ended April 30, 2024, net loss reached $117.5 million compared to the net income of $49.3 million in Q2 fiscal 2023. Despite the significant strain on the bottom line, the small-cap is down by only 3.14% year to date. Laurentian Bank has consistently reported profits every year in the last four fiscal years.

A positive factor why Laurentian Bank remains a contender or option for dividend investors is the resiliency and stability of Canada’s banking sector. The 52.68% payout ratio indicates a solid industry position and that it can afford to pay and sustain the quarterly dividend payments. The current share price of $25.64 is a steal.

According to Provost, management further simplified the bank’s operations during the quarter. “The Bank maintained a strong and prudent liquidity position and remained well capitalized in light of continuing macroeconomic headwinds,” he added.

Laurentian Bank’s renewed strategic plan focuses on three key elements. First, the bank aspires to foster prosperity for clients. Second, it enhances the banking experience through digital transformation. Third, it improves efficiency. The Q3 fiscal 2024 results on August 30, 2024, could determine whether the bank stock is a viable prospect or buying opportunity.

Maintaining dividends is a company goal

Polaris Renewable Energy operates in the five Latin American countries, which could be a deal-buster for some investors. The $255.65 million company acquires, develops and operates renewable energy projects in the Dominican Republic, Ecuador, Nicaragua, Panama, and Peru.

However, Polaris has never incurred a loss since 2020 and has kept investors whole on its dividend commitment since 2016. If you invest today, the share price is $12.13 (-5.38% year to date). Market analysts recommend a buy rating for PIF. Their 12-month average price target is $22.50, a 46% upside potential.

In the first half of 2024, total revenue and net earnings declined 4% and 74.8% year over year to $39.33 million and $5.33 million, respectively. Despite the earnings drop, Polaris CEO Marc Murnaghan said maintaining a quarterly dividend remains the top company goal.

Established dividend payers  

Laurentian Bank and Polaris are established companies in their sectors. Their high yields and dividend consistency are good reasons to add them to your investment portfolio.

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 Christopher Liew has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Polaris Renewable Energy. The Motley Fool recommends Bank Of Nova Scotia and Laurentian Bank Of Canada. The Motley Fool has a disclosure policy.

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