One of the main reasons why investors buy dividend stocks is for the passive income they generate. So naturally, investors are drawn to high-yield dividend stocks due to the significant passive income they can provide each year.
However, while high-yield dividend stocks can be attractive, it’s essential to ensure that the dividend is safe and sustainable. It doesn’t matter how much a stock yields today if it will need to cut its dividend in the near future.
So with that in mind, here are two high-yield dividend stocks with rock-solid payout ratios that dividend investors can consider adding to their portfolios today.
An ultra-cheap stock to consider today
One stock that’s faced some significant headwinds lately but still offers a high yield and safe dividend is Corus Entertainment (TSX:CJR.B).
With a recession on the horizon, companies across almost every sector have been slowing their advertising spending. This cost cutting has directly impacted Corus’ business.
However, the hit to Corus’ revenues is not all bad. The stock has fallen so significantly that investors now have the opportunity to buy the high-yield dividend stock at an unbelievably cheap valuation.
Furthermore, while the company recently trimmed the dividend to remain conservative, CJR still offers a yield of roughly 7.3%.
What Corus has going for it is that even with a recent impact on revenue, as well as inflationary pressures affecting its costs, it’s constantly earning tonnes of free cash flow. Cash generation is part of the reason why it can return so much cash back to investors.
For its current fiscal year, Corus is expected to report free cash flow per share of $0.78 and earnings per share (EPS) of $0.22. Meanwhile, the annual dividend is just $0.12, giving Corus a rock-solid payout ratio.
In addition to Corus offering an attractive yield and a safe payout ratio, the estimates for its current fiscal year are also significantly lower than what Corus has earned in the past, as well as what analysts expect it can earn in the future.
For example, analysts estimate that in fiscal 2024, Corus will report $0.36 in EPS, an increase of 63%. Furthermore, free cash flow per share is expected to be right around $1.00 in fiscal 2024.
So although this high-yield dividend stock is certainly facing some major headwinds in the current environment, it’s dirt cheap, and its $0.12 annual dividend looks considerably safe.
One of the top high-yield dividend stocks in Canada
Freehold Royalties (TSX:FRU) is another excellent dividend stock investors can consider today.
Freehold owns land that other energy companies use to produce oil and gas. It’s a relatively simple business model that sees Freehold consistently earn cash without needing to spend any money on capital expenditures.
Therefore, Freehold is constantly earning tonnes of free cash flow, which allows the high-yield dividend stock to return a bunch of cash to investors each month while also retaining capital to invest in acquiring more land and growing its operations.
Right now, the stock offers a yield of more than 7.7%, as its annual dividend is currently $1.08 per share. Meanwhile, Freehold is expected to earn $1.89 in free cash flow per share this year, as well as $1.93 next year. This gives FRU stock a current payout ratio of 57%, right in line with its target of 60%.
Plus, with Freehold currently trading over 20% off its 52-week high, investors have the opportunity to buy the stock at an appealing discount.
So, if you’re looking for high-yield dividend stocks that can help boost your passive income, Freehold is certainly one to consider.
