Finding quality high-yielding, dividend-paying stocks is, or should be, every investor’s dream. But while it is not that hard to find high-yield dividend-paying stocks, finding quality ones is extremely hard.
I will go over three high-yielding stocks and explain why, I believe, they are high-quality ones.
Alaris Royalty Corp. (TSX:AD)
With a current dividend yield of 9.32%, Alaris represents a very interesting, if unconventional, high-risk dividend stock pick.
It provides capital to private businesses and collects dividends from these investments (preferred shares) as well as participation in the potential profit and growth of these companies, and it has had a rough time.
The stock price has behaved accordingly, falling 28% since January 2017 and trading at less than half of what it was trading at in January 2015.
Alaris looks for companies that have good, stable track records of free cash flow, a low risk of obsolescence or declining asset base, management stability and continuity, low debt level,s and low capital-expenditure requirements.
I have to say, I’m biased, and I naturally have a soft spot for this company, as these are many of the same things I look for when considering putting my money to work in the stock market.
Underperforming investments have been a disappointment, but all the while, despite some stressful moments, the stock has been paying investors a nice dividend, and the current dividend yield is now at record levels of 9.32%.
So, the most obvious selling point of this company as an investment is its dividend yield at 9.82%, and the fact that the dividend has increased almost 100% since 2010.
Further to this is the fact that the shares are trading at a pretty attractive valuation at this time; they’re trading at book value.
The payout ratio has been high, which has been a worry, but with management now forecasting a payout ratio of below 90%, and with a pretty healthy balance sheet, showing a debt-to-total-capitalization ratio over 20%, things may be looking up.
With a dividend yield of 8.03%, Cardinal Energy Ltd. (TSX:CD) is an energy stock that will continue to benefit from strong oil prices. And with 50% of its production coming from light oil assets with low decline rates, the investment case gets even stronger.
The payout ratio, even after taking into account planned growth expenditures (drilling capex), is below 100%, which should leave investors with an acceptable comfort level, especially given increasing oil prices.
Lastly, Ensign Energy Services Inc. (TSX:ESI) has a dividend yield of 8.04%, and is also benefiting from rising oil and gas prices.
Pricing for its energy services is rising, driving higher margins and cash flows and making its dividend payment all the more affordable.
We are in a period of time in the energy sector where elevated dividend payouts can be supported given the quickly improving fundamentals in the industry.
In summary, these high-yielding dividend stocks are not without risk, but given the yields and the fundamentals surrounding each of these names, it is my view that they are good buys for the investor that is willing to accept higher risk for these higher payouts.
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Fool contributor Karen Thomas has no position in any of the stocks mentioned. Alaris is a recommendation of Dividend Investor Canada.