Attention Income Investors: 2 Attractive Stocks Paying Reliable 5-6% Dividend Yields

Power Financial (TSX:PWF) (NYSE:PWF) and another Canadian financial company offer above-average dividends that should continue to grow. Is one a better bet today?

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Income investors are constantly on the hunt for stocks with above-average dividend payments that are both reliable and growing.

Let’s take a look at two companies that might be interesting picks for your portfolio today.


At the current price of $112 per share, CIBC’s dividend provides a yield of 5%.

Many investors skip CIBC in favour of its larger peers, primarily due to concerns that the company is over-exposed to the Canadian residential housing market. It is true that CIBC’s mortgage portfolio is large relative to its size. The company has a market capitalization of $50 billion and reported total mortgages and home equity lines of credit (HELOC) of about $223 billion at the end of the last quarter. Royal Bank is three times larger than CIBC by market capitalization, but its mortgage and HELOC book is just $286 billion.

A meltdown in the Canadian property market would certainly hit CIBC harder than some of the other banks, but things would have to get pretty bad before the company takes a material hit. Households have weathered the rate increases reasonably well over the past two years, and it looks like the Bank of Canada is going to pause its rate-hike program, which should help avoid a hard landing for the housing market.

CIBC remains very profitable and has a strong capital position, so the dividend should be solid. Currently trading at less than 10 times trailing earnings, the stock appears somewhat oversold.

Power Financial (TSX:PWF)

Power Financial is a holding company with Canadian assets in the insurance and wealth management sector. It is also part owner of a European firm that has positions in a variety of the region’s top global businesses.

For the first nine months of 2018 the company reported net earnings of $1.8 billion, or $2.48 per share, compared to $1.5 billion, or $2.09 in the same period the previous year. The Q4 results come out next week and should round out a solid performance. The company just announced plans to spend $1.65 billion on a share buyback program, so management appears to think the stock is undervalued.

Power Financial’s stock price is up nearly 20% from the December low and is approaching its 12-month high. More upside could be on the way and investors can still pick up an attractive 5.8% yield. The company raised the payout last year, and given the share-repurchase announcement, another dividend hike is likely in the cards for 2019.

Is one a better bet?

CIBC and Power Financial should both be solid buy-and-hold picks for an income-focused portfolio. If you only buy one, CIBC looks oversold today and could provide some nice upside when sentiment improves.

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 Andrew Walker has no position in any stock mentioned.

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