The higher interest rates and economic uncertainty have weighed on the equity market, leading to a decline in the prices of several top dividend stocks even with a stable earnings base. While the fundamentals of these top dividend-paying Canadian corporations remain strong, the recent pullback has driven their yields higher. Thus, investors shouldn’t miss the opportunity to capitalize on their low share price and lucrative yields.
With this background, let’s look at three Canadian stocks with inexpensive valuations and high yields.
With a stellar dividend yield of 7.22% (based on its closing price of $49.94 on June 14), energy infrastructure company Enbridge (TSX:ENB) appears to be a highly attractive dividend stock. Enbridge transports oil and gas and benefits from the low-risk cash flows that support its higher dividend payments.
The resiliency of Enbridge’s payouts is reflected in its solid dividend payment history. Enbridge has paid a regular dividend for 68 years. Meanwhile, it has raised its dividend in the last 28 consecutive years.
Enbridge’s solid base of conventional and renewable energy assets, highly diversified income streams, and low-intensity capital projects position it well to deliver solid DCF (distributable cash flows) that will cover its payouts. Also, power-purchase agreements and contractual arrangements with counterparties that reduce commodity price risk bode well for growth. Enbridge’s high yield is well protected. Meanwhile, its target payout ratio of 60-70% of DCF is sustainable in the long term.
NorthWest Healthcare Properties
The higher interest rates, elevated leverage, and weakness in transaction volumes have weighed on the shares of NorthWest Healthcare Properties (TSX:NWH.UN). Given the decline, this REIT, or real estate investment trust, offers a high yield of 10.39%. Nonetheless, the company has taken steps to deleverage its balance sheet and lower average interest costs, which will support its cash flows.
Northwest Healthcare owns a defensive portfolio of healthcare real estate. Further, most of its tenants are supported by government funding. It benefits from the high occupancy of its real estate and a long lease expiry term of approximately 13.6 years. Also, about 83% of its leases are backed by indexation, supporting organic growth.
Overall, its geographically diversified assets, high occupancy rate, inflation-protected rents, and focus on deleveraging its balance sheet position it well to pay steady dividend in the coming years.
The final stock on this list is TC Energy (TSX:TRP). Like Enbridge, TC Energy transports hydrocarbons and has a stellar dividend payout history. For instance, TC Energy increased its dividend at an average annualized growth rate of 7% in the past 23 years. Furthermore, the company expects to grow its future dividend by 3-5% annually in the coming years.
TC Energy’s contracted and regulated assets witness a high utilization rate and account for about 95% of its earnings. This implies that TC Energy’s payouts are safe and well protected.
Looking ahead, TC Energy’s $34 billion secured growth projects will likely expand its regulated and contracted asset base and drive its earnings and cash flows. Furthermore, it offers a high yield of 6.83%.