The low-interest rate environment has driven more people to the stock market in search for higher yields. If you’re looking for safe yields in the market, check out these quality companies, which offer yields of more than 4%.
These companies have the potential to grow their dividends to help you counter inflation and maintain your purchasing power.
Manulife Financial Corp. (TSX:MFC)(NYSE:MFC) has the potential to trade at 15 times its earnings. Currently, it trades at below 10 times its earnings. This means that it’s very undervalued.
If it traded at a multiple of 15 tomorrow, it would be worth about $26.80 per share. So, its shares are undervalued by up to 30%.
Manulife’s share price has declined from a 52-week high of about $24 to $17.70 per share. Coupled with a dividend hike of 8.8% this year, it now yields 4.2% with a sustainable payout ratio of about 40%.
Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) is the third-largest bank in Canada by market cap. It has leading positions in North America, Latin America, the Caribbean and Central America, and parts of Asia.
It pays one of the safest dividends on the Toronto Stock Exchange. It even maintained its dividend in the financial crisis of 2008.
At about $64.60, Bank of Nova Scotia yields 4.5% and trades at a reasonable multiple of 11.2. Its dividend is 5.9% higher than it was a year ago. Its payout ratio is about 50%, so its dividend is sustainable.
In the medium term, Bank of Nova Scotia anticipates to increase its earnings per share by 5-10%. If the bank maintains the same payout ratio, investors can expect it to increase its dividend by at least 5% per year.
Brookfield Property Partners LP (TSX:BPY.UN)(NYSE:BPY) owns, operates, and invests in quality property assets around the world.
Core retail and office properties make up about 85% of its portfolio, and opportunistic investments in multi-family, industrial, hospitality, triple net lease, and self-storage assets make up about 15% of its portfolio.
Brookfield Property pays a U.S. dollar–denominated distribution, which boosts unitholders’ income when the U.S. dollar is strong against the Canadian dollar.
Since Brookfield Property’s distribution can consist of interest, dividend, other income, and return of capital from the U.S., interested investors should hold it in an RRSP to avoid U.S. withholding taxes on affected portions of the distribution.
The units have pulled back after the Brexit vote as about 16% of its assets under management are in the U.K. and Europe.
At about $30.30 per unit, Brookfield Property is undervalued and yields 4.8% based on the current foreign exchange between the U.S. dollar and the Canadian dollar. The company aims to increase its distribution by 5-8% per year.
Conclusion
Don’t miss out on the opportunities to buy these great companies today at reasonable valuations to start earning a nice income with starting yields of 4.2-4.8%.
If their prices fall further, investors can simply buy more shares for higher yields.
