Lock In a 6% Yield With 3 Generous Stocks

The importance of a high yield gets proportionally higher as the stock’s capital appreciation gets lower — i.e., when you are buying almost purely for dividends.

| More on:
Young woman sat at laptop by a window

Image source: Getty Images.

When buying a stock for both its capital-appreciation potential and dividends, you can compromise a lot on the yield. But when you are buying a stock solely for its dividend, especially if it’s not a Dividend Aristocrat that might grow its payouts over time, you should try to lock in as high a yield as possible.

And if your threshold for a high yield is 6%, three stocks should be on your radar — especially for your TFSA portfolio for a passive income.

An energy company

Calgary-based Canacol Energy (TSX:CNE) is currently one of the smallest energy companies by market cap, which is at $533 million right now. This wasn’t always the case, and it’s trading at an 81% discount from its 2011 peak and roughly 61% discount from its 2014 peak.

And though it’s currently a long shot, if this natural gas exploration company has even a slight chance to reach its former height, it can easily double your investment cap.

As of now, Canacol is an intelligent buy for its dividends. The company’s dividend history is relatively short, as it only started paying dividends in the last quarter of 2019, and the payout ratio is still too high.

But the company is committed to paying dividends, and it’s experiencing a positive uptick in both contracted sales volume and reserves, which might translate into more robust financials. This will make its current 6.67% yield significantly more stable.

A capital markets company

Even though there were few parallels between the Great Recession crash and the 2020 crash, the post-crash recovery has not been the same. For example, Alaris Equity Partners (TSX:AD.UN) grew its market value in about five years following the Great Recession by 678%. And in the last two years, the stock has only appreciated about 163%.

It’s pretty slow compared to the last growth phase, but even if the company can sustain the current 80%-a-year capital appreciation, it would be an excellent buy. It may easily double your capital in the next 15 to 16 months. And another strong reason to consider adding this company to your portfolio today would be its mouth-watering 6.72% yield.

A REIT

Any list of high-yield stocks would be remiss without a REIT, and for this list, PRO REIT (TSX:PRV.UN) has made the cut. The commercial REIT has a heavy industrial lean in its 120-property portfolio. Its weighted average lease term of 4.6 years, while quite decent, is not comparable to some peers with an average of a decade or more.

However, there are three numbers associated with this REIT that are investor magnets. The first is the generous 6.2% yield. The second number endorses the sustainability and long-term dividend potential — i.e., the payout ratio, which is brutally stable at 32.4%. And the third number is its price-to-earnings multiple of just 4.4%, making it quite attractively valued.

Another reason to consider this stock is the probability of raising its payouts again to its early 2020 levels, which would be quite a bump.

Foolish takeaway

The three dividend stocks with generous yields and relatively high sustainability potential can make perfect additions to your dividend portfolio. Two of them — Canacol and Alaris — also come with decent capital-appreciation potential.  

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 recommends Alaris Equity Partners Income Trust.

More on Dividend Stocks

Question marks in a pile
Dividend Stocks

Where Will Brookfield Infrastructure Partners Stock Be in 5 Years?

Brookfield Infrastructure Partners (TSX:BIP.UN) kicked off 2024 with a bang. Where will it be in five years?

Read more »

Retirement
Dividend Stocks

Golden Years Gain: Your CPP Benefits at Age 70

CPP users delaying pension payments until 70 will receive substantial monthly income streams in the golden years.

Read more »

data analytics, chart and graph icons with female hands typing on laptop in background
Dividend Stocks

3 Dividend Stocks You Can Safely Hold for Decades

Top TSX dividend stocks are on sale.

Read more »

Dividend Stocks

Where Will Canadian Utilities Stock Be in 5 Years?

Canadian Utilities (TSX:CSU) is a classic example of a stock where the dividend is all you get. Can the company…

Read more »

Man holding magnifying glass over a document
Dividend Stocks

2 Stocks I’m Watching for Big Passive Income

Consider Bank of Nova Scotia (TSX:BNS) and another top passive-income play to power your dividend portfolio!

Read more »

Target. Stand out from the crowd
Dividend Stocks

2 Dividend Stocks to Double Up on Right Now

These top TSX stocks have increased their dividends annually for decades.

Read more »

bulb idea thinking
Dividend Stocks

2 Supercharged Dividend Stocks to Buy if There’s a Stock Market Sell-Off

These two top stocks offer attractive yields, have reliable operations and are dividend aristocrats, making them two of the best…

Read more »

question marks written reminders tickets
Dividend Stocks

Better Buy: Loblaw Companies or Metro Stock?

Loblaw Companies (TSX:L) stock is riding on recent momentum. Meanwhile, Metro (TSX:MRU) is executing for future earnings growth.

Read more »