3 Cheap High-Yield Stocks for Hardcore TFSA Investors

Yield-thirsty TFSA investors can equally allocate their 2022 contribution limits to three cheap, high-yield dividend stocks to generate higher tax-free income.

| More on:
Increasing yield

Image source: Getty Images

The annual Tax-Free Savings Account (TSFA) limit hasn’t changed since 2019. Users who have used up their contribution rooms have a fresh $6,000 limit in 2022. With inflation rising at a faster past, Canadians will turn to their TFSAs to create a financial cushion or passive income.

For hardcore TFSA investors, Rogers Sugar (TSX:RSI), American Hotel Income Properties (TSX:HOT.UN), or AHIP, and Diversified Royalty (TSX:DIV) are the best options. You won’t spend more than $6 per share on the three price-friendly stocks to partake of the generous yields.

Recession resistant

Rogers Sugar is a consumer staple stock, so the business will stay afloat in inflationary and deflationary periods. In Q1 fiscal 2022, the $606.83 million sugar and maple producer experienced lower sales volume from market volatility. Management reported 5.5% and 17.5% declines, respectively, in sugar and maple syrup volumes versus Q1 2021.

However, due to improved pricing during the quarter, gross margins increased. Total revenue grew 3.1%, while net earnings climbed 25.1% compared to the same quarter last year. Notwithstanding the greater volatility in customer demand in Q4 2021, Rogers Sugar maintains a positive financial outlook for 2022.

The recession-resistant stock hardly displays wild price swings. At $5.85 per share, Rogers Sugar pays a fantastic 6.15% dividend.

Recovery mode

AHIP was a dividend beast until the global pandemic crippled the hotel industry. The real estate investment trust (REIT) had to cut costs and suspend payouts to shareholders after Q1 2020 to conserve cash. Interestingly, the real estate stock outperforms the TSX year to date at +17.77% versus -1.01%.

This $349.17 million REIT owns and operates premium-branded, select-service hotels in the secondary metropolitan markets in the United States. AHIP is in recovery mode, as evidenced by the impressive results in Q3 fiscal 2021. Total revenue and net operating income (NOI) increased 47.7% and 80.8%, respectively, versus Q3 fiscal 2020.

Net income reached $15.7 million compared to the $12.7 million net loss in the same quarter in fiscal 2020. The 68.8% occupancy rate from 57.1% was also a bright spot. AHIP’s CEO, Jonathan Korol, said the board has approved the reinstatement of distributions.

Korol added, “The return of our monthly distribution is appropriate and possible due to the financial resiliency of our portfolio.” At $4.44 per share, AHIP offers a 5.16% dividend.

Cheapest cash cow

Diversified Royalty is the cheapest cash cow you can find on the TSX. The share price is only $3.08, but the dividend yield is an ultra-high 7.14%. The $376.53 million multi-royalty corporation owns the trademark to Mr. Lube, AIR MILES, Mr. Mikes, Sutton, Nurse Next Door, and Oxford Learning Centres.

Based on the preliminary Q4 and full-year 2021 data, the six royalty partners are slowly recovering or working their way through the ongoing impacts of COVID-19. Mr. Lube in particular is thriving, and the business is back to pre-pandemic levels. Once things return to normal, expect the royalty corporation to increase cash flow per share through accretive royalty purchases and growth of bought royalties.

Higher tax-free income

The average dividend yield of Roger Sugar, AHIP, and Diversified Royalty is 6.15%. TFSA investors can generate $369 in tax-free income by allocating $2,000 in each of the stocks from their $6,000 contribution limits. However, be sure you understand the inherent risks in the respective businesses.

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 Christopher Liew 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

dividends grow over time
Dividend Stocks

2 Dividend Stocks That Can Generate $2,000 in Passive Income by 2025

Investing in high-dividend stocks such as Whitecap can help you generate $2,000 in annual passive income by 2025.

Read more »

edit Woman calculating figures next to a laptop
Dividend Stocks

Should You Invest in BCE Stock for its Dividend?

BCE stock is not yet out of the woods. But this article could change your perspective about the stock and…

Read more »

sale discount best price
Dividend Stocks

Bargain Hunting for Dividends: 3 High-Yield Stocks Haven’t Been This Cheap in Years

Enbridge (TSX:ENB) stock's key enterprise value multiple reached a new multi-year low recently. BCE remains a high-yield dividend play while…

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

Cash in Your Pocket: 3 TSX Dividend Stocks That Pay Out Monthly

Bolster your monthly income with these three dividends stocks that act like regular paycheques.

Read more »

A plant grows from coins.
Dividend Stocks

Beat the TSX Index With These Cash-Gushing Dividend Stocks

These cash flow-rich stocks are more likely to gush passive dividend income streams long into the future.

Read more »

Golden crown on a red velvet background
Dividend Stocks

Here Are My Top 5 Dividend Aristocrats to Buy Right Now

Canadian National Railway (TSX:CNR) is a Dividend Aristocrat with 27 years of dividend growth.

Read more »

Woman has an idea
Dividend Stocks

The Smartest Canadian Dividend Stocks to Buy With $500 Right Now

Besides their years-long dividend-growth track record, the strong fundamentals of these Canadian dividend stocks make them really attractive to buy…

Read more »

retirees and finances
Dividend Stocks

No, the CPP Didn’t Squander $46 Billion of Taxpayer Money

The Globe and Mail claimed that the CPP Board mismanaged Canadians' money, but it beat the returns earned by the…

Read more »