Hedge Against Inflation: Top TSX Dividend Stocks Fetching +6% Yields

Investing your extra money in these TSX stocks would help you earn regular cash and hedge your portfolio against inflation.

| More on:
Increasing yield

Image source: Getty Images

Canada’s inflation has eased a bit (the annual inflation rate reached 7%) in August. Despite the moderation, it continues to remain high. Amid such a scenario, sitting on too much cash will not help you beat inflation or create wealth. Thus, I’d recommend investing your extra cash in dividend stocks offering high and reliable yields to hedge against inflation and earn regular income. 

Against this backdrop, I have picked out stocks that offer investors reliable dividend income and a high yield of over 6%. Let’s delve into details.

Enbridge 

The first stock on my list is Enbridge (TSX:ENB)(NYSE:ENB). This energy stock is popular for consistently increasing its dividend. For context, Enbridge has grown its dividend uninterrupted for 27 years. Moreover, it offers a well-protected yield of 6.4% and has a payout ratio of 60-70% of its distributable cash flows (DCF).

Enbridge has 40 diversified sources to earn cash. Further, 80% of its EBITDA (earnings before interest, taxes, depreciation, and amortization) has protection against inflation. This helps Enbridge to generate solid DCF to cover its payouts. Enbridge sees its DCF/share grow by 5-7% annually in the medium term, implying its dividend could increase at an equal rate. 

Keyera 

The next stock, Keyera (TSX:KEY), is also from the energy space. In the last 14 years, this energy infrastructure company has managed to grow its DCF/share at an average annualized rate of 8%. During the same period, Keyera increased its dividend by a CAGR (compound annual growth rate) of 7%.

Its high asset utilization rate helps generate solid cash flows that fund its dividend payouts and growth initiatives. Keyera expects its EBITDA to grow at a CAGR of 6-7% through 2025. This will drive its DCF/share and dividend payments. Keyera stock is yielding 6.3% at current price levels. 

Pizza Pizza Royalty

Investors could consider Pizza Pizza Royalty (TSX:PZA) stock for its stellar 6.3% dividend yield. The reopening of the economy has fueled demand for its offerings, reflected through the strong growth across all its channels (delivery, walk-in, pickup). 

Thanks to the increased sales (Royalty Pool System Sales jumped 17.3% in the first half of 2022) and solid cash balance, Pizza Pizza Royalty is well positioned to increase its dividend and boost shareholders’ returns. Further, its growing store count and its policy to distribute most of the available cash to maximize shareholder returns should act as catalysts for its stock price. 

NorthWest Healthcare Properties REIT

I’ll end this list with a REIT (real estate investment trust). REITs are known for their high payout ratios and solid dividend payment track records. One such top REIT is NorthWest Healthcare (TSX:NWH.UN). It owns healthcare-focused real estate assets that remain resilient to market cycles. Further, it has a high-quality tenant base (over 80% of tenants are supported by governments). This adds a lot of stability to NorthWest’s payouts.

It’s worth mentioning that the majority of NorthWest’s rents (about 82%) are indexed against inflation. Further, it enjoys a high occupancy rate of over 97%. Other than this, NorthWest also benefits from its long-weighted average lease expiry term of 14 years.  

Overall, this REIT is well positioned to enhance its shareholders’ value amid the current environment. Moreover, its diversified real estate portfolio and focus on U.S. expansion bode well for growth. Among everything, its high yield of 6.8% attracts the most.

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 Sneha Nahata has no position in any of the stocks mentioned. The Motley Fool recommends Enbridge, KEYERA CORP, and NORTHWEST HEALTHCARE PPTYS REIT UNITS. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Increasing yield
Dividend Stocks

3 TSX Stocks With High Dividend Yields

These three high-yielding dividend stocks would be excellent additions to your portfolio in this volatile environment.

Read more »

Payday ringed on a calendar
Dividend Stocks

New Investors: 3 Top TSX Dividend Stocks That Pay Cash Monthly

Canadian investors looking for monthly dividends have plenty of options on the TSX. Here's three of my favourite stocks for…

Read more »

woman data analyze
Dividend Stocks

These U.S. Stocks Are No-Brainer Additions to Your Portfolio

Buy these two no-brainer U.S. stocks if you want to gain exposure to international stocks in your self-directed portfolio.

Read more »

Value for money
Dividend Stocks

1 Value Stock Every Canadian Investor Should Own

This value stock not only has a solid present, but a stable future at incredibly cheap and even oversold prices!

Read more »

sale discount best price
Dividend Stocks

Passive-Income Alert: 2 Great Canadian Dividend Stocks Trading at Cheap Prices

TFSA investors can now buy top TSX dividend stocks at discounted prices for a portfolio focused on passive income.

Read more »

Growing plant shoots on coins
Dividend Stocks

Long-Term Investing: 2 Top Dividend-Growth Stocks to Power Your Portfolio

While many growth stocks remain under pressure in this environment, here are two top dividend-growth stocks to buy now and…

Read more »

edit Safety First illustration
Dividend Stocks

2 of the Safest Dividend Stocks on Earth Right Now

Royal Bank of Canada (TSX:RY)(NYSE:RY) is one of the safest stocks on earth, historically speaking.

Read more »

TFSA and coins
Dividend Stocks

TFSA 101: How Retirees Can Earn $407.50 Per Month Tax Free for Decades

Retirees can buy top TSX dividend stocks at cheap prices right now for a TFSA focused on passive income.

Read more »