The economic uncertainty amid persistently high inflation and increasing interest rates continues to pose challenges for investors seeking gains from equities. Despite the tough macro environment, investors can still make attractive income from top dividend-paying stocks.
Thankfully, investors can find several top companies that have been paying dividends for years on the Canadian stock exchange. What stands out is that a few of them offer a lucrative yield of at least 6%. While the yields of these companies look attractive, investors should note that dividends are not guaranteed. Therefore, they should diversify their portfolios and not depend on one or two stocks.
Against this backdrop, let’s look at three Canadian stocks that offer at least a 6% yield.
Keyera
Keyera (TSX: KEY) is an integrated energy infrastructure company that offers a monthly payout. It has a market cap of over $6.5 billion and pays a monthly dividend of $0.16 a share, translating into a dividend yield of 6.7% based on the closing price of $28.73 on March 22.
Its stellar yield is covered through its strong distributable cash flows (DCF). Notably, the solid demand for its energy infrastructure assets coupled with fee-for-service and take-or-pay contracts enable Keyera to deliver substantial DCF that drives its dividend payments.
For instance, Keyera’s DCF/share has grown at a CAGR (compound annual growth rate) of 7% in the last 14 years. At the same time, the company increased its dividend by 6% annually.
Looking ahead, the steady demand for its fee-for-service energy infrastructure assets will likely drive its earnings and dividend payments. Moreover, its focus on lowering debt and strong balance sheet bode well for growth. Also, Keyera’s target dividend-payout ratio of 50–70% of the DCF is well-covered and sustainable.
NorthWest Healthcare Properties REIT
REITs, or real estate investment trusts, are known for their higher payouts and are attractive investments for income investors. Among REITs, investors could consider investing in NorthWest Healthcare (TSX:NWH.UN), which owns a defensive portfolio of international healthcare real estate infrastructure.
Its high-quality tenant base (tenants are supported by government funding), long-term leases (weighted average lease expiry term of about 14 years), inflation-protected rents, and high occupancy rate (about 97%) positions it well to enhance its shareholders’ return through monthly dividend payments.
NorthWest is also expected to benefit from its solid development pipeline and geographic diversification. Investors can earn a high dividend yield of 9.3% by investing in NorthWest Healthcare near current levels.
Pembina Pipeline
Pembina Pipeline (TSX: PPL) is another high-quality stock for dividend income. It provides energy transportation and midstream services. Notably, Pembina has maintained and increased its dividend payments since 1998. Moreover, its assets are well-diversified and highly contracted, implying that its payouts are well-protected.
Owing to its highly contracted asset base and solid fee-based cash flows, Pembina Pipeline has grown its dividend by about 5% per annum in the past decade. Looking ahead, Pembina expects the strength in its base business, benefits from new growth projects, and focus on reducing debt to help drive its earnings and cash flows and, in turn, dividend payments.
Pembina Pipeline pays a quarterly dividend of $0.652 per share (or a monthly dividend of $0.217), reflecting a dividend yield of 6.1% based on its closing price of $42.62 on March 22.
