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As interest rates are poised to decline, high-yield dividend stocks are attractive investment opportunities for those seeking consistent income. However, not all high-yield dividend stocks are worth buying and holding, as their payouts may not be sustainable in the long run. One should look for TSX stocks with solid fundamentals and a growing earnings base, which will support their future payouts.
Thus, for those seeking a high yield of 5% or more, here are three reliable Canadian dividend stocks to buy today.
High-yield stock #1
Canadians seeking reliable, high-yield dividend stocks could add Telus (TSX:T) to their portfolio. This leading communication giant is known for generating profitable growth and consistently rewarding its shareholders with higher dividend payments. Since 2004, the company has returned over $21 billion in dividends, reflecting its ability to generate consistent free cash flow. Furthermore, Telus has increased its dividend 27 times since 2011, making it a dependable source of income for investors.
Recently, Telus increased its quarterly dividend by 7%. Further, it plans to grow its future dividends by 7-10% under its dividend growth program. Notably, Telus stock offers a high yield of over 7%, which is near the current market price, and its payout ratio of 60-75% of free cash flow is sustainable in the long term.
The telecom giant’s payouts will be supported by its growing earnings base. The company is seeing significant growth from its mobile network expansion and increased revenue from residential internet, TV, and security subscribers. Additionally, Telus is focused on improving its cost-to-serve and driving higher margins per user, which positions the company for continued profitability. The company’s strategic efforts to monetize copper and real estate, along with growth in its health services division, are expected to further support earnings.
With a growing customer base, strong retention rates, cost-efficiency, and management’s commitment to reward shareholders, Telus will likely return solid cash in the coming years.
High-yield stock #2
Investors could consider adding Canadian banking stocks to their portfolio for worry-free passive income. Among the top banks, Toronto-Dominion Bank (TSX:TD) stands out for its high yield and impressive dividend-growth rate. The Canadian financial services giant has paid dividends for 167 years. Moreover, since 1998, the bank’s dividend has grown at a compound annual growth rate (CAGR) of 10%, the highest among its peers.
Toronto-Dominion Bank’s impressive dividend-growth history reflects its ability to consistently grow its earnings. The bank’s diversified revenue stream, growing loans and deposits, steady credit performance, and operating efficiency position it well to generate solid earnings. Further, its accretive acquisitions accelerate its growth rate and support higher payouts.
The financial services company has a sustainable payout ratio of 40-50% and offers a compelling yield of more than 5% near the current market price.
High yield stock #3
Enbridge (TSX:ENB) is a no-brainer high-yield TSX stock to buy now. This energy infrastructure company has been paying dividends for about seven decades and has consistently increased its dividend for 30 years. Besides its growing dividends, Enbridge stock offers an attractive yield of more than 6%.
The company’s payouts are well-covered through its diversified revenue base and higher utilization of its system. Its extensive liquids pipeline, long-term contracts, and regulated tolling frameworks drive steady growth. Further, its investments in traditional and renewable energy assets, strategic acquisitions, and low-capital projects are poised to boost its earnings and cash flows.
Enbridge’s bottom line and distributable cash flows (DCF) are projected to increase at a mid-single-digit rate in the long term, driving its future distributions. Moreover, its payout ratio of 60-70% of its DCF is sustainable.
