The Canadian stock market houses some of the most lucrative dividend stocks with high yields. In a market where interest rates are falling, it is time to rebalance your portfolio, as a guaranteed investment certificate (GIC) may not be able to keep up with inflation. This is the market in which to capture a higher yield with good dividends. However, not all stocks with high dividend yields are attractive, and not all high-yield stocks are risky.
Source: Getty Images
Two no-brainer dividend stocks to buy right now
Often, a dividend stock has a high yield because the stock’s price falls significantly. Before rushing to buy a stock for its high yield, you should understand why the stock price fell. If the cause of the decline is temporary and you can see healthy cash flows for the company in the long term, buy those stocks without delay and keep accumulating them.
Here are two high-yield stocks worth buying.
Telus stock
Telus Corporation (TSX:T) stock is offering a dividend yield of 7.6%. This yield is arrived at by estimating an annual dividend per share of $1.61 in the coming four quarters. The company increased its quarterly dividend by 3.4%, keeping up with its semi-annual dividend growth. And there are expectations that the management will announce another 3.4% growth in mid-2025. However, the balance sheet is a little stressed, given the huge debt Telus took to fund its 5G rollout.
Its net debt-to-EBITDA (earnings before interest, taxes, depreciation, and amortization) stood at 3.8 times. It means that the company’s net debt is almost four years of its operating earnings, way above its target range of 2.2 can a–2.7 times its EBITDA.
High debt could strain Telus’ net profit and distributable cash flow. However, the capital spent on building the infrastructure will pay off with more 5G subscriptions and higher average revenue per user in the future. The company has reduced its capex and is restructuring its business to cut costs. It is also investing in digital technologies and artificial intelligence (AI) to facilitate the next-generation AI at the edge.
All challenges have come at the same time for the telecom sector – high capital spending towards technology transition, high interest rates, industry consolidation, and the regulator’s demand to provide smaller players access to their network. Consequently, telecom stocks are falling. Now is the time to buy this stock that has slipped 38% from its peak in April 2022. The increase in dividend per share and share price dip have pushed the dividend to 7.6%.
The rate cuts will leave some room for Telus to reduce its finance costs, and the increasing adoption of 5G will help Telus finance its future capex.
CT REIT
CT REIT (TSX:CRT.UN) is another dividend stock you can buy for less than $15 a share and lock in a 6.2% yield. The stock is down 17% from April 2022 as the rise in interest rates negatively affected property prices and reduced the fair market value of CT REIT’s property portfolio. The REIT owns 370 retail properties, four industrial properties, and one mixed-use commercial property.
The REIT has $2.9 billion in debt, but 99.97% of it is unsecured, interest-only debt, which means the REIT only pays the interest and not the principal. It has enough EBITDA of 3.6 times to pay interest on debt and funds from operations to pay monthly distributions (75% payout ratio) and grow them annually by 3%. The next distribution growth will come in July 2025.
Now is the time to buy the units and lock in a higher yield. The fair market value of its property portfolio seems to have been corrected. The unit price could increase once property prices revive. Until then, you could enjoy the distributions from rental income.
