Why These 2 Stocks Yielding More Than 7.3% Might Just Be Your Next Big Money-Makers

With a strong history of dividend growth and special dividend payments, ZCL Composites Inc. (TSX:ZCL) is a stock to own for retirement income.

| More on:
Person Hands Opening Mailbox To Remove Newspaper

Image source: Getty Images

Capturing yield is still hard in this environment of persistently low long bond yields and a flat yield curve, making it frustratingly difficult to get a decent yield on our investments.

This is what has caused investors to flock to Canadian bank stocks and utility stocks – and what’s caused me to even look at higher yielding stocks for that extra dividend income.

Stocks such as Chorus Aviation Inc. (TSX:CHR) and ZCL Composites Inc.  (TSX:ZCL).

Chorus Aviation

Chorus Aviation is a dividend-paying holding company that owns Jazz Aviation LP as well as other companies involved in the aviation business. It is currently yielding 7.14%.

Its focus is on delivering regional aviation to the world and it has done so since 2010, delivering a monthly dividend to shareholders along the way.

The company’s business is less risky than a conventional airline business, and the recent $97 million investment by Air Canada and the extension of the Jazz capacity purchase agreement (CPA) until 2035 illustrates why.

The company’s revenue is in large part fixed-fee contracted revenue and jet fuel price increases are passed down to Air Canada.

The latest few quarters have seen Chorus report positive free cash flow and this new investment and CPA contract will result in greater cash flow stability going forward.

The stock is worth serious consideration for the extra dividend income it provides shareholders.

ZCL Composites

ZCL is a manufacturer and supplier of fiberglass reinforced plastic underground storage tanks, and they have been seeing strong demand, as evidenced by these results and the results over the last few years.

In a nutshell, as an investor, I’m interested in this company because of these three facts:

First, the business model is cash flow strong and stable, and it is not a capital intensive business.

Free cash flow in 2013 was $15 million, and in 2017 it was $17 million, representing a free cash flow margin (free cash flow as a percentage of revenue) of 9%, a very strong number.

Second, the dividend yield is 7.3%.

And it has seen phenomenal growth, growing from $0.11 in 2013 to $0.54 in 2018, for a more than 35% compound annual growth rate during this time. As well, the company has announced numerous special dividends, the latest one being a special dividend of $0.40 per share in May 2018.

Finally, the balance sheet remains in stellar condition with minimal debt on the books.

In closing, these little-talked about stocks are providing investors with an attractive dividend yield and are worth a look today.

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 Karen Thomas has no position in any of the stocks mentioned. Chorus is a recommendation of Stock Advisor Canada.

More on Dividend Stocks

Two seniors float in a pool.
Dividend Stocks

TFSA: How to Earn $1,890 in Annual Tax-Free Income

Plunk these investments into your TFSA to earn passive income and avoid the taxman.

Read more »

Engineers walk through a facility.
Dividend Stocks

1 TSX Stock I Wouldn’t Touch With a 10-Foot Pole

AtkinsRéalis (TSX:ATRL) is one TSX stock I'd never invest in.

Read more »

edit Woman in skates works on laptop
Dividend Stocks

3 No-Brainer Stocks to Buy Under $30

These three stocks all offer a huge deal for investors looking for dividends, as well as growth that will last.

Read more »

You Should Know This
Dividend Stocks

How to Convert a $300 Monthly Investment Into $338 in Monthly Income

If you want a certain amount in monthly passive income, invest a similar amount today and leave the rest to…

Read more »

Increasing yield
Dividend Stocks

3 Income Stocks With Big Yields to Consider in April 2024

If you haven’t yet made your March investments, here are three income stocks to buy the dip and lock in…

Read more »

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Dividend Stocks

RRSP Investors: Don’t Miss Out on This Contribution Hack!

This hack has so many benefits for you -- not just when you put it in your RRSP but for…

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

Passive Income: 2 Safe Dividend Stocks to Own for the Next 10 Years

Dividend stocks such as Manulife and Fortis can help you generate a stable and recurring passive-income stream.

Read more »

Young woman sat at laptop by a window
Dividend Stocks

3 Dividend Stocks Everyone Should Own for the Long Haul

For investors looking for top-tier dividend stocks to buy and hold for the long term, here are three of my…

Read more »