The Canadian stock market boasts plenty of opportunities for investors to use different approaches to achieve financial freedom. As of this writing, the S&P/TSX Composite Index is up by almost 4% year to date.
Currently, the Canadian benchmark index is down by almost 9% from its 52-week high, suggesting that shares of most stocks across the board trade at discounts. When share prices go down, the dividend yields of dividend paying stocks become inflated.
Passive income seekers making intelligent bets on high-quality dividend stocks can use this as an opportunity to lock in higher-yielding dividends. Not all dividend stocks with inflated dividend yields are good investments. It is essential to identify stocks with strong underlying businesses and the ability to keep distributing shareholder dividends reliably.
To this end, I will discuss two dividend stocks to consider adding to your portfolio.
Canadian Tire Corporation
Canadian Tire Corporation (TSX:CTC.A) is a $10.3 billion market capitalization retail company operating in the automotive, sports, hardware, and housewares sector. While initially a company selling tires, the retailer has expanded its offerings to various discretionary products. Canadian Tire has started becoming less of a discretionary retailer, adding several essential item categories to its locations.
As of this writing, CTC stock trades for $169.49 per share. After an impressive rally in the last few weeks, the stock is up by 21.8% from its 52-week low. However, it still trades for a 13% discount from its 52-week high. At current levels, it boasts a juicy 4.07% dividend yield. By adding its shares right now, you can lock in its high-yielding payouts while growing your wealth long-term through capital gains.
SmartCentres REIT (TSX:SRU.UN) is a $4 billion market capitalization real estate investment trust (REIT) that invests in, owns, and generates income from a portfolio of commercial and residential properties.
The company develops complete and connected mixed-use communities on its existing retail properties. The retail REIT’s expansion into the residential real estate space has allowed it to increase its revenues.
The REIT boasts a respectable 98% occupancy rate, recovering to pre-pandemic levels. As it pushes forward with its residential expansion, the trust will likely increase its revenue, potentially translating to dividend hikes. As of this writing, SRU.UN stock trades for $27.70 per share, boasting a juicy 6.68% dividend yield you can lock in right now.
A word of warning: Stock market investing is inherently risky. Even when you invest in reliable dividend stocks, you must remember that payouts are not guaranteed. Developments within the underlying company or the broader market may force dividend stocks to slash, suspend, or stop paying out to investors altogether.
Due to their regular payouts and solid fundamentals that can support dividend payouts, Canadian Tire stock and SmartCentres REIT are two exceptional options to consider for passive income seekers.