The Toronto Stock Exchange (TSX) has no shortage of dividend stocks. However, seeing double-digit yields is a rarity, at least not without a high degree of capital risk involved. Double-digit dividend yields are not common, but it can happen when stocks offering reasonably high yields fall on the stock market, inflating the yields.
Unusually high-yielding dividends typically indicate that the stock is too risky. However, it can be a great opportunity to grow your wealth rapidly when the underlying business is solid.
When dividend yields are unusually high and the stock is not financially healthy, a dividend cut or complete dividend suspension is a reasonable possibility. If you are focused on dividend investing, allocating money to a dividend stock that is slashing or suspending its payouts is not ideal.
However, investing in ultra-high-yielding dividend stocks with a decent shot at recovery can offer you amazing returns on your investment. Between better returns due to higher yields and capital gains as the stock recovers, investing in the right dividend stocks can generate a lot of wealth growth. Today, I will discuss two TSX dividend stocks you can consider for this purpose.
Fiera Capital
Fiera Capital Corp. (TSX: FSZ) is a $631 million market capitalization investment firm headquartered in Montreal. It has always been a generous dividend-paying stock but has become more so in recent years. While it has offered high-yielding payouts for a few years, its dividend yield right now is the highest it has been. As of this writing, Fiera Capital stock trades for $7.57 per share, boasting an 11.36% dividend yield.
At current levels, it trades for a 50% discount from its November 2013 all-time high. Barring the sudden dip and recovery in 2020 due to the pandemic, it has been on a slow downward trajectory in that time.
Valued at 6.4 times forward earnings, Fiera Capital stock is well-positioned to deliver substantial growth in the second half of 2023. Even if it does not recover to its 2013 levels, the combination of capital gains and high-yielding dividend income can easily deliver stellar returns on your investment in the coming years.
True North REIT
The series of interest rate hikes by the Bank of Canada (BoC) has made it difficult to invest in growth stocks. True North REIT (TSX: TNT.UN) is a $308 million market capitalization Real Estate Investment Trust (REIT) you can consider investing in for significant wealth growth in the next few years.
As of this writing, True North REIT trades for $3.34 per share, reflecting a 44.2% year-to-date decline in 2023. The release of its final fiscal 2022 earnings hit hard and triggered the sell-off after it announced a 50% reduction in its distribution.
However, the reduction in its payout and a strategic sale of two Ontario-based properties in its portfolio will strengthen its financial situation. At current levels, it boasts a massive 8.89% annualized dividend yield despite slashing the payout in half.
While this may be alarming for some, the steps its management has taken can allow the stock to recover while distributing payouts on schedule. A recovery to its February 2023 levels alone can double your investment. Combined with regular dividend income, it can offer substantial total returns in the coming years.
Foolish takeaway
Both ultra-high-yielding dividend stocks might remain small-cap stocks after a complete recovery, but it does not mean they are too risky to consider. While they might not offer the same stability as blue-chip stocks, Fiera Capital stock and True North REIT can be good investments to capitalize on high-yielding dividends and capital gains to boost your wealth in the coming years.
