Investing in high-yielding dividend stocks is one of the convenient ways to boost your passive income. The secondary income can help ease pressure in this inflationary environment. So, if you are looking to invest in dividend stocks, here are my three top picks.
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TC Energy
TC Energy (TSX: TRP) owns and operates a pipeline network transporting crude oil and natural gas across North America. It also owns several power production and storage facilities. The company’s cash flows are stable, with 95% of its adjusted EBITDA ( earnings before interest, tax, depreciation, and amortization) generated through long-term agreements. Supported by solid cash flows, the company has raised its dividends since 2020 at a CAGR (compounded annual growth rate) of 7%. It pays a quarterly dividend of $0.93/share, with its yield currently at 6.91%.
Meanwhile, TC Energy could continue to benefit from the growth in LNG (liquefied natural gas) exports. After putting $5.8 billion into service last year, the company expects to put around $6 billion of projects into service this year. The contributions from these new projects could offset lower contributions from the Keystone Pipeline project and higher interest expenses to drive its EPS (earnings per share) this year. Additionally, the company’s management is hopeful of growing its adjusted EBITDA at a CAGR of 6% through 2026, which could help the company maintain its dividend growth. So, I believe TC Energy would be an excellent buy for income-seeking investors.
TransAlta Renewables
Another high-yielding dividend stock you could add to your portfolio would be TransAlta Renewables (TSX: RNW), which owns and operates 48 renewable energy facilities with a total production capacity of three gigawatts. It currently pays a monthly dividend of $0.07833/share. However, given its capital-intensive business, the rising interest rates have weighed on the company’s stock price, which currently trades at over 36% lower than its 52-week high. The steep correction has boosted its dividend yield to 7.6%.
Meanwhile, TransAlta Renewables sells most of the power produced from its facilities through long-term PPAs (power purchase agreements), shielding its financials from fluctuations. The average remaining contractual life of these contracts is 12 years. Besides, the company is constructing several projects in Australia and expects to return its Kent Hills facilities to service this year. These growth initiatives could boost its financials, thus allowing the green energy provider to pay dividends at a healthier rate.
NorthWest Healthcare Properties REIT
With a dividend yield of 9.7%, NorthWest Healthcare Properties REIT (TSX:NWH.UN) would be my final pick. Amid the rising interest rates, the company has witnessed a substantial sell-off over the last few months. Its adjusted fund flows from operations (AFFO) per share declined by 16.1% in 2022 amid higher interest expenses, a temporary surge in debt levels, and lower transaction volumes.
However, the company has identified $220 million worth of non-core assets in its portfolio, which it plans to sell. Besides, it is working on lowering its stake in the United Kindom and the United States joint ventures. These initiatives could deliver net proceeds of around $425–$500 million, thus accelerating its deleveraging strategy. So, despite the challenging macroenvironment, I believe NorthWest Healthcare’s payouts are safe.
