3 Dividends With a 3.5% Yield You Can Actually Count On

These yields may not jump off the page, but they’re more reliable. Dividend investors, take note.

| More on:
The Motley Fool

In the endless search for good dividend-paying stocks, you will find plenty of Canadian companies offering big yields. But these companies are a big gamble. They often pay out more in dividends than they can afford, and when the business environment turns against them, shareholders may have to face a dividend cut. If and when that happens, the stock price usually plunges.

The fact is, dividends are hard to come by, and if we want a payout we can actually rely on, we have to accept a lower yield. On that note, below are three companies more suitable for dividend investors.

1. TransCanada

There are few industries in Canada more reliable than pipelines. The companies operate critical infrastructure, sign long-term contracts, and are facing plenty of growing demand from Canada’s energy sector. So earnings tend to be very steady and predictable, ideal for paying a strong dividend. A perfect example is TransCanada Corporation (TSX: TRP)(NYSE: TRP), Canada’s second largest pipeline operator.

The pipelines tend to pay out roughly 70% of their earnings to shareholders, so there’s little danger of a company like TransCanada being stretched. And with a yield of 3.5%, shareholders don’t have to pay too much for such stable dividend income.

2. Thomson Reuters

The headlines have not been kind to information services provider Thomson Reuters (TSX: TRI)(NYSE: TRI) in recent years. For example, the botched release of Eikon, its new financial product, has allowed rivals like Bloomberg to steal market share.

But Thomson still makes revenue based on subscription services (which makes earnings more predictable), most of which are still healthy and growing. Its Legal division, which is actually larger than the Financial & Risk division despite getting less attention is particularly solid.

Thomson’s dividend currently yields a healthy 3.6%, which is not as much as some high-yielding energy producers, but is far more reliable.

3. Telus

Speaking of subscription services, this is of course how Canada’s big three telecommunications providers make their money. And of the three, Telus (TSX: T)(NYSE: TU) has been having the most success as of late. More specifically, the company has been adding far more wireless subscribers than its rivals, and has done a better job holding onto them too.

Telus’s dividend yields 3.9%, again not a number that jumps off the page. But this is a dividend that has increased more than five-fold over the past decade. And given Telus’s performance and stability, further dividend hikes look very likely. Again, you’re better off with this payout than a bigger one from a less-reliable company.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Benjamin Sinclair has no position in any stocks mentioned.

More on Investing

A close up image of Canadian $20 Dollar bills
Dividend Stocks

This High-Yield Dividend Stock Is a Monster Passive-Income Machine 

This top TSX dividend-growth stock offers a 7.4% yield.

Read more »

path road success business
Bank Stocks

Scotiabank Is Down 0.9% After Earnings: What Investors Need to Know

Bank of Nova Scotia (TSX:BNS) released earnings yesterday. Here's what you need to know.

Read more »

Hourglass projecting a dollar sign as shadow
Dividend Stocks

For a Shot at $5,000/Year in Passive Income, Buy 6,850 Shares of This TSX Stock

Whitecap Resources is a monthly dividend stock that offers you a tasty dividend yield while trading at a cheap valuation.

Read more »

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Wednesday, May 29

Besides more Canadian corporate earnings, volatile commodity prices could give further direction to the TSX benchmark today.

Read more »

Happy family father of mother and child daughter launch a kite on nature at sunset
Investing

3 Soaring Stocks to Hold for the Next 20 Years

These three stocks are good bets for the long haul, given their healthy long-term growth prospects.

Read more »

grow dividends
Tech Stocks

Celestica Stock Is up 44% Since Earnings: What Investors Need to Know

Celestica continues to benefit from strong demand and production efficiencies, yet the stock remains undervalued.

Read more »

A plant grows from coins.
Investing

2 Dividend Stocks Paying 5% or More That Could Beat the Market in 2024 and Beyond 

Here are two top dividend stocks long-term investors may certainly want to consider for their yields and growth profiles right…

Read more »

edit Balloon shaped as a heart
Dividend Stocks

Love Value Stocks? 2 That Are Screaming Buys in May 2024

Patience can pay off by investing in these two value stocks with nice dividends and the potential to turn around.

Read more »