High-Yield Alert: 3 Canadian Dividend Stocks to Buy Immediately

A high yield doesn’t necessarily mean a stock is great, but in the case of these three, that’s the truth.

Amy Legate-Wolfe

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote: “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published November 19, 2024 4:40 pm EST

| More on: AP.UNFRUXEI

High-yield dividend stocks can be a haven for investors during turbulent times, offering a steady income stream while markets churn. Allied Properties REIT (TSX:AP.UN), Freehold Royalties (TSX:FRU), and iShares S&P/TSX Composite High Dividend Index ETF (TSX:XEI) are three excellent options for those seeking both stability and robust dividend yields. That’s why today, we’re taking a closer look at these investments to highlight why each shines even in volatile markets.

Allied Properties

Allied, a real estate investment trust (REIT), focuses on owning and managing urban office spaces in Canada’s major cities. With a strong emphasis on sustainability, Allied has carved out a niche in adaptive reuse and modern office formats. Recent financial results revealed some challenges, with funds from operations (FFO) per unit dropping to $0.50 in the third quarter (Q3) of 2024 from $0.60 in the same quarter last year. This dip reflects broader headwinds in the real estate sector. However, Allied’s management remains optimistic about future growth, citing strong demand for its workspace formats in cities like Toronto and Montreal.

Despite these operational hurdles, Allied’s dividend yield remains a significant draw, currently sitting at an impressive 9.81%. The company maintains a forward annual dividend of $1.80 per unit, providing a dependable income stream for investors. Allied’s portfolio benefits from its prime locations and unique office spaces. These are well-positioned to cater to the growing trend of businesses seeking high-quality, sustainable work environments.

Freehold stock

Freehold offers another compelling choice for income-focused investors. Specializing in leasing oil and gas royalties, Freehold stock has demonstrated resilience in the face of fluctuating commodity prices. In Q3 2024, the company reported revenue of $73.9 million, a 12% decline year over year, with net income falling to $25 million. However, Freehold’s strong liquidity and efficient operations remain highlights, with liquids production up 3% from the prior year and a payout ratio of 73%, ensuring the sustainability of its near 8% dividend yield.

What sets Freehold apart is its diversified portfolio of royalty interests across North America, giving it exposure to some of the most productive oil and gas basins. While weak gas prices have created some challenges, Freehold’s focus on higher-margin oil production has helped mitigate these impacts. With net debt reduced by $12 million and a strong balance sheet, the company is well-equipped to weather market volatility while maintaining its generous dividend payouts.

XEI ETF

For a diversified option, the XEI exchange-traded fund (ETF) is an excellent choice. This ETF offers exposure to a broad range of high-yield Canadian stocks. With a yield of 5.06%, XEI provides a steady income stream while spreading risk across sectors such as energy, financial services, and utilities.

XEI has also performed well year to date, delivering a total return of 17.02%. This robust performance highlights the ETF’s ability to capture the upside of Canada’s resource-heavy market. All while mitigating risks through diversification. Its top holdings, including major banks and energy companies, are known for their stable dividends and strong cash flows, making XEI a resilient choice in uncertain times.

Foolish takeaway

High-yield dividend stocks and ETFs like these not only offer compelling income opportunities but also tend to outperform during market downturns. Companies like Allied and Freehold, with their strong dividend histories, provide stability and income when stock prices are volatile. Meanwhile, ETFs like XEI allow investors to diversify and reduce risk while still enjoying high yields.

It’s worth noting, however, that high yields often come with higher risks, such as sensitivity to interest rates or sector-specific challenges. Allied Properties faces uncertainties in the office real estate market, particularly with shifts in work-from-home trends. Freehold, while benefiting from high oil prices, is exposed to the volatile energy sector. Investors should consider these factors alongside their overall financial goals.

High-yield dividend stocks like AP.UN and FRU, coupled with a diversified ETF like XEI, can be powerful tools for navigating volatile markets. These provide not only income but also a measure of stability and resilience in portfolios. By focusing on companies with strong fundamentals and sustainable payout ratios, investors can make the most of these opportunities while weathering the ups and downs of the market.