Investors chase high dividend stocks because the payouts can increase investment profits. Without a doubt, retirees who live off or rely on dividends for sustenance prefer juicy yields. However, not all companies can sustain paying high dividends, especially those vulnerable to interest rate risk.
If you want safer options with lucrative yields, consider the Bank of Nova Scotia (TSX:BNS), Aecon Group (TSX:ARE), and Superior Plus Corp. (TSX:SPB). A Big Five Bank is a no-brainer buy, despite worries over the financial system. Both the construction firm and regulated utility company can thrive despite a challenging environment.
No significant risks
The weakness of the financial sector of late stems from the recent collapse of two American banks, including Silicon Valley Bank. According to Mike Rizvanovic, an analyst at Keefe, Bruyette & Woods, Canadian banks are largely insulated from the mess.
Rizvanovic adds, “Canada’s banking sector does not face significant risks related to its deposit base, which remains “well-diversified across industries.” Moreover, the country’s major banks have lower exposure or lending to the technology industry.
While the bank failures in the U.S. stoke fears, CIBC Capital Markets analyst Paul Holden said, “Liquidity positions across the Canadian banks are strong.” BNS, Canada’s third-largest bank, has been paying dividends since 1832, and the outstanding track record isn’t under threat.
BNS trades at $65.76 per share (+0.69% year to date), while the dividend offer is 6.27%. The $82.3 billion bank pays the highest dividend among the Big Five banks. Its President and CEO, Scott Thomson, said the bank has a rock-solid foundation, a diversified revenue base, many competitive advantages, and opportunities for growth.
Aecon is outperforming the TSX year to date, +36.77% versus +1.05%. At $12.46 per share, you can partake in the 5.64% dividend yield. The $766.3 million company builds projects that cover various construction areas such as civil, industrial, and urban transportation.
In 2022, total revenue increased 18% year over year to $4.7 billion, a new record for Aecon. However, profit declined 38.8% to $30.4 million versus 2021. Nevertheless, management said demand for Aecon’s services across Canada continues to be strong, particularly in smaller- and medium-sized projects,
President and CEO, Jean-Louis Servranckx, said the growing recurring revenue programs, current backlog level, and volume of new awards would support Aecon’s further revenue growth over the next few years.
Resilient propane business
Superior Plus is North America’s leading distributor and marketer of propane and distillates, and related products and services. Its President and CEO, Luc Desjardins, said the business model in the propane distribution businesses is resilient to overcome COVID-19 health measures, rising inflation, and labour costs, including the impact of volatile commodity costs.
In Q4 2022, net earnings ballooned 356.5% to $63 million versus Q4 2021. Adjusted EBITDA increased 28% year over year to a record $182.6 million. Desjardins said the Certarus acquisition would provide Superior Plus with a significant organic growth segment in the low-carbon mobile fuels industry.
At $11.03 per share (-0.72% year to date), the $2.2 billion company pays a fantastic 6.35% dividend.
Counter inflation and rate hikes
Lucrative yields can help investors cope with inflation and combat rate hikes. However, if you’re devoting your portfolio to high-dividend stocks, look at the dividend history of the prospect and its capability to sustain the payout.