TSFA Investors: 3 Great Dividend Stocks Yielding up to 11.6%

Stuff great dividend stocks like Alaris Royalty Corp (TSX:AD) and Gamehost Inc. (TSX:GH) into your TFSA today and enjoy great dividends for decades to come.

| More on:
potted green plant grows up in arrow shape

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

A TFSA stuffed with dividend stocks can be an incredibly powerful income generation tool, especially after a few decades of compounding.

As I’ve outlined before, it’s not really that hard to become a TFSA millionaire. If an investor maxes out their contribution room and gets a half-decent rate of return, their millionaire status is inevitable.

Think about how nice it would be to have a cool million spinning off gobs of lucrative tax-free income. At just a 4% yield, you’d be looking at $40,000 annually. That’s the equivalent of making $55,000 or $60,000 from traditional employment income, depending on your province.

Now think about how attractive a dividend yield of 6%, 8%, or even 10% would be. That would be a heck of an income stream, even a few decades from now.

Here are three stocks with generous dividends you can stuff in your TFSA today. Begin building your passive-income empire now.

Gamehost

Gamehost (TSX:GH) is a small-cap casino operator with properties in Grande Prairie, Fort McMurray, and Calgary in Alberta.

Shares are priced at an attractive valuation because of concerns about the overall Alberta economy, trading at just 14 times forward earnings. Casino results have been somewhat weaker with revenue taking a small hit and earnings falling some 25% since peaking in 2014. The Fort McMurray wildfires didn’t help results either.

There’s still a lot to like here. The casino business is a good one; Gamehost regularly generates close to 40% operating margins. Management recently announced a hotel acquisition that should increase the bottom line. And the company can still afford its generous dividend. The payout is 7.1%.

Alaris Royalty

Alaris Royalty (TSX:AD) is a finance company that takes a special ownership stake in a company — usually in the form of preferred shares — in exchange for a generous dividend stream. Often, the dividend is tied to increasing sales or earnings, which gives Alaris some upside potential if the company does well.

In 2017 and 2018, Alaris ran into a few problems when some of its royalty partners had financial difficulties, which led to lower payments. And some of the more successful partners also exercised exit clauses, which resulted in a nice one-time bump but sacrificed longer-term earnings.

The good news is the company has put some capital back to work over the last few months, including a US$46 million investment in advertising company GWM Holdings and a similar investment in Body Contour Centers, a plastic surgery company with some 50 locations across the United States. Both these investments boosted income by approximately 10% each, with Alaris’s management sharing the wealth with shareholders by increasing the dividend.

Alaris’s new annual payout is $1.65 per share, which gives shares a generous 8.5% yield.

American Hotel Properties

I’m the first to admit American Hotel Properties REIT (TSX:HOT.UN) has a somewhat risky dividend. The current yield is 11.6%. Anything above 10% is usually viewed as at risk of being cut.

American Hotel Properties has completely transformed its business over the last five years. The company used to only own bargain-priced hotels that catered to rail workers, which came with the benefit of renting rooms twice a day to both day and night shift employees. After more than a dozen acquisitions, most revenue today comes from nicer hotels located in larger cities.

At this point, the company can afford the dividend, with payments over the last year barely below adjusted funds from operations. The company was also doing renovations on a couple of its marquee properties, which caused a temporary drop in profits. Bulls hope earnings will rebound to the point where the company offers a 90% payout ratio.

Another reason to be bullish on American Hotel Properties is the insider buying from new CEO John O’Neill. O’Neill purchased some 57,000 shares in December alone and has elected to take his salary in the form of stock. That alone is a pretty bullish signal.

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 Nelson Smith owns shares of Gamehost Inc. Alaris is a recommendation of Dividend Investor Canada.

More on Dividend Stocks

exchange-traded funds
Dividend Stocks

2 Dividend ETFs With Significant Exposure to the TSX’s Top 2 Sectors

Two dividend ETFs offer ideal diversification because of their exposure to the TSX’s two strongest sectors.

Read more »

Illustration of bull and bear
Dividend Stocks

3 Top ETFs Canadians Can Buy Amid a Bear Market

Monthly dividend-paying ETFs allow investors to generate a stable stream of recurring income, making them ideal bets in a volatile…

Read more »

Oil pipes in an oil field
Dividend Stocks

3 Dividend-Paying TSX Energy Stocks for TFSA Investors

TSX energy stocks will likely continue to beat broader markets!

Read more »

Portrait of woman having fun in the street.
Dividend Stocks

3 Fantastic Stocks for Young Investors

You are never in a better position to be daring with your investment than early on in your life. But…

Read more »

data analyze research
Dividend Stocks

1 Investment Strategy That Works in a Higher-Rate Environment

Market analysts say that dividend investing is back in style and a winning strategy in a higher-rate environment.

Read more »

Dividend Stocks

Top 3 REITs That Are Yielding Over 3%

Canadian real estate investment trusts such as Dream Industrial offer you the opportunity to benefit from a steady stream of…

Read more »

Target. Stand out from the crowd
Dividend Stocks

Beginner Investors: 1 Top Dividend Stock Pick to Buy for Stagflation

Fortis (TSX:FTS)(NYSE:FTS) is a great dividend stud to buy and hold through stagflationary, recessionary, or inflationary times.

Read more »

Young woman sat at laptop by a window
Dividend Stocks

Tax-Free Passive Income: 2 Oversold TSX Dividend Stocks for TFSA Investors

These top TSX dividend stocks look cheap to buy today for TFSA investors focused on passive income.

Read more »