Investing in high-dividend-yield stocks is attractive for their stable cash flow and defensive qualities, offering investors regular income. However, as the S&P/TSX Composite Index has surged 21% year-to-date, outperforming the S&P 500 by 7 percentage points, the valuations of many former high-yield candidates have risen, compressing their dividends. For instance, TD Bank, which boasted a 5.5% yield in 2024, now offers a yield of just 3.8%.
Despite the broader market rally, a screen of the market reveals four quality Canadian stocks that still offer dividend yields above 5%.
Canadian telecom stocks have faced pressure due to slow revenue growth and contracting margins. A declining share price combined with ongoing dividend hikes has pushed Telus’s yield to a high of 7.6%. With a reliable customer base and a healthy balance sheet, the current depressed share price may present an investment opportunity. This high yield is highlighted first due to its standout value.
As a leading Canadian pipeline company, Enbridge currently offers a dividend yield of 5.5%. Although this is below its historical average, its current valuation remains attractive. With steady demand for energy infrastructure, the company’s long-term earnings potential is promising. It follows as a core infrastructure play.
As a leading integrated energy company, CNQ’s shares have significantly underperformed the market this year. This underperformance has supported its dividend yield, which stands at 5.3%. Despite short-term challenges, its foundational position in the Canadian energy sector remains solid. It is grouped thematically with Enbridge.
This renewable energy company has been making significant waves, recently signing multi-billion dollar power supply deals with Microsoft and Google. Investors can gain exposure through either a corporate or a limited partnership structure. It concludes the list as a growth-oriented option within the high-yield space.
The red-hot TSX has made high-yield stocks increasingly scarce. Yet, as these four examples demonstrate, opportunities for yields above 5% still exist for investors who know where to look. It is important to note that high dividends can sometimes reflect sector-specific challenges, so thorough fundamental analysis remains crucial.
