2 TSX Dividend Stocks With Seriously Huge Payouts

Not all high-yield stocks are risky. Some are simply victims of weak markets and adverse circumstances, making them viable additions to your portfolio.

| More on:
Various Canadian dollars in gray pants pocket

Image source: Getty Images

Whether you are investing in dividend stocks to start a passive-income stream now or wish to grow them for the future (via a dividend-reinvestment plan) for your retirement years, a high yield is hard to pass on. But if the yield is too high, it pays to be skeptical about the reasons behind it.

Market-wide or even industry-wide slumps that result in a considerable dividend yield are typically safe, assuming they don’t hurt the company’s financials hard enough to make the dividends unaffordable and unsustainable.

However, if the high yield is isolated to one or a few stocks within the industry, especially in a bull market, then there is cause for concern. But even with companies like these, you may consider locking in a high yield if there are signs of recovery.

An investment management company

Montreal-based Fiera Capital (TSX:FSZ) is an investment management company that operates in multiple markets and has roughly $158 billion worth of assets under management (AUM). That’s quite a portfolio for a company with a market capitalization of just $763 million. The largest segment of the company’s AUM is in public market equities, closely followed by fixed-income assets.

Almost 62% of the revenue comes from Canada, and the rest comes from the U.S. and other international markets. Even though it’s not a very healthy diversified mix, it may be enough to keep the company afloat if its Canadian revenues are in trouble.

Fiera Capital is not a good pick from a capital-appreciation perspective, even though it’s on the rise from its recent slump and has already grown 4.4% in 2023. However, the company is a fantastic investment from a dividend perspective, thanks to its mouthwatering yield of 9.3%.

That’s enough to start a $ 387-a-month passive income with $50,000 invested in the company.

The high yield is backed by a payout ratio of 156%, which may not seem healthy, but the company has sustained and even grown its dividends through much higher payout ratios, so we can reasonably assume that it may do the same in the future as well.

An iron ore company

Base metals are less exciting than precious metals like gold or silver or even battery metal mining stocks that have gained a lot of traction in the last few years thanks to an electric vehicle (EV) boom. However, the correct base metal stock can be just as promising regarding capital-appreciation potential and far more attractive from a dividends perspective.

Labrador Iron Ore Royalty (TSX:LIF) is that stock and offers a potent mix of growth potential and high-yield dividends. The stock is currently on its way up and has grown 11% this year. But it’s still trading at a 23% discount from its last peak, which is one of the reasons behind its attractive 7.33% yield.

The $0.7 quarterly dividends per share are pretty low compared to what the company paid its investors in the second and third quarters of 2021, but the payout ratio is stable. Considering the company’s dividend history, the payouts may increase significantly in the right market conditions.

Foolish takeaway

The high yield is currently the only factor common between the two stocks, and they are radically different from most other perspectives. This makes them a good combination from a diversification standpoint.

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 Fiera Capital. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Dividend Stocks

3 Canadian REITs That Pay Out Every Month

$10 can buy you a stake in a REIT that pays monthly distributions yielding 8.2% annually. CT REIT and another…

Read more »

A meter measures energy use.
Dividend Stocks

3 Reasons to Buy Utility Stocks in 2023

Here's why adding utility stocks to your portfolio is a smart idea, as we face significant uncertainty in 2023.

Read more »

Modern buildings in business district
Dividend Stocks

2 Top Residential REITs to Buy in February 2023

These two top residential REITs to buy offer attractive passive income as well as long-term growth potential.

Read more »

Simple life style relaxation with Asian working business woman healthy lifestyle take it easy resting in comfort hotel or home living room having free time with peace of mind and self health balance
Dividend Stocks

TFSA Investors: Make $102/Month Without Lifting a Finger

Here’s an amazing monthly Canadian dividend stock that can help TFSA investors earn reliable passive income for years.

Read more »

IMAGE OF A NOTEBOOK WITH TFSA WRITTEN ON IT
Dividend Stocks

TFSA Passive Income: Earn $129/Month Tax Free

Do you seek passive income? Leverage your TFSA to earn tax-free passive income via these Dividend Aristocrats.

Read more »

Silver coins fall into a piggy bank.
Dividend Stocks

How to Invest $23,000 in 2023 to Create Passive Income

Here's how income-generating cash cows such as Canadian Utilities and TC Energy can help you earn over $1,000 in annual…

Read more »

Early retirement handwritten in a note
Dividend Stocks

2 High-Dividend Stocks to Buy Today for Early Retirement

You can buy these two high-dividend Canadian stocks right now to help you plan an early retirement from work.

Read more »

worry concern
Dividend Stocks

Worried About Market Downturn? Buy This High-Yielding (6.3%) Dividend Stock

The stock market has been pretty volatile lately. It’s better to have a balanced portfolio that can perform in every…

Read more »