3 Dividend Stocks for Over 5% Yield and A Stable Payout Ratio

While it’s not a rock-solid affirmation of a stock’s sustainability, the payout ratio is a good indicator of the financial health of a company’s dividends.

| More on:
grow dividends

Image source: Getty Images

Whenever dividend safety is paramount, the easiest thing to do is to stick to the select group of dividend aristocrats. But by doing so, you may be limiting yourself to a small pool of assets and relatively smaller yields.

But if all you need is dividend sustainability (not growth) and the surety that your payouts will not be slashed or suspended without a significant reason/catalyst, then you can extend the pool of potential investments to include dividend stock with stable payout ratios.

If you are craving a yield of 5% or more, there are three dividend stocks that should be on your radar.

A consumer staples company

Rogers Sugar (TSX:RSI) is the largest refined sugar company in the country and the largest maple syrup one globally. However, that leadership position in the industry and a clear competitive advantage hasn’t imbued the stock with the right capital appreciation potential. The stock has been hovering around the $5 centre point for the last 10 years.

The dividends, however, are almost as sweet as the products the company makes. The current yield is an attractive 6%, a whole percentage point more than 5, and the payout ratio is 81%, which is quite stable, especially considering the historical payout ratios. This affordable stock with a generous yield could be a great dividend holding, especially for starting a passive income.


The Oakville-based Nexus REIT (TSX:NXR.UN) is going through a correction that was inevitable, considering the bullish phase it went through after the 2020 crash. This usually stagnant stock is over 135% from its lowest point to the 2021 peak, and one of the reasons behind this unusual investor attraction (for the stock) was its dividends.

The REIT is currently offering a 5.4% yield, which, while quite juicy, is nothing compared to what the company was offering by mid-2020. But even more compelling than the higher yield was the payout ratio that remained 44% despite the economic harshness of 2020. The REIT is currently going through a rebranding phase to better reflect the industrial orientation of its portfolio.

A mortgage company

While the big banks control the bulk of the mortgage market in Canada, there is a significant portion of potential borrowers that don’t fit the bill for these banks. This allows companies like First National Financial (TSX:FN), the largest non-bank mortgage lender in the country, to fill in the void. The company caters to both the residential and commercial real estate industries.

First National is also the only aristocrat on this list. So you don’t just get the 5.3% yield when you invest in this stock; you also get reasonable surety that the company will keep increasing your payouts over time. The dividends are quite attractive from a sustainability perspective as well, and its payout ratio has remained under 100% since 2016.

Foolish takeaway

These three dividend stocks can help you with your long-term dividend goals because even though two of them aren’t aristocrats, they are stable businesses with healthy payout ratios and generous yields. Whether you want to start a passive income or reinvest the dividends to grow the size of your stake, the companies are valid options.

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 Adam Othman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

More on Dividend Stocks

Arrowings ascending on a chalkboard
Dividend Stocks

The 5.5% Dividend Stock Set to Dominate the TSX

TD Bank (TSX:TD) stock looks severely undervalued while the yield is around 5.5%.

Read more »

protect, safe, trust
Dividend Stocks

Passive Income: How to Earn Safe Dividends With Just $10,000

These three dividend stocks with resilient business models and a growing earnings base can provide durable passive income.

Read more »

Printing canadian dollar bills on a print machine
Dividend Stocks

How to Use Your TFSA to Earn $34,150 Per Year in Tax-Free Income

Canadian investors can hold undervalued TSX dividend stocks in a TFSA and benefit from outsized gains 2024 and beyond.

Read more »

Target. Stand out from the crowd
Dividend Stocks

3 Monthly-Paying Dividend Stocks That Are Screaming Buys Right Now

These three monthly-paying dividend stocks are excellent additions to your portfolios.

Read more »

Growing plant shoots on coins
Dividend Stocks

TFSA Set and Forget: 1 Dividend-Growth Superstar for the Long Run

Manulife Financial (TSX:MFC) stock is in the zone, with dividend hikes and big buybacks likely in the cards.

Read more »

little girl in pilot costume playing and dreaming of flying over the sky
Dividend Stocks

For a Shot at $6,228/Year in Passive Income, Buy 755 Shares of This TSX Stock

Looking for passive income? You'll need to look beyond only dividends. Which is why EIF stock could be one of…

Read more »

Piggy bank with word TFSA for tax-free savings accounts.
Dividend Stocks

TFSA Investors: 2 Dividend Stocks I’d Buy and Hold Forever

These two stocks could provide long-term investors multi-year returns of more or less 10% per year

Read more »

crypto, chart, stocks
Dividend Stocks

Why Waste Connections Stock Keeps Going Up

Waste Connections stock (TSX:WCN) continues to hit all-time highs. But is more on the way, or is an investment wasteful?

Read more »