Some of the higher-yielding income stocks haven’t really had a front-row seat to the U.S. stock market’s magnificent rally. On this side of the border, the TSX Index has seen quite tame gains, with the index rising barely 1% year to date. Meanwhile, the S&P 500 is up nearly 15%, with the growth-heavy Nasdaq 100 now up a jarring 39%.
Who would have thought last year’s losing sector would be this year’s winner?
Now, high-interest rates (more may be to come) are still in play, as too is the potential recession that we’ve spent a majority of last year biting our nails over. Indeed, inflation still remains a thorn in consumers’ sides, but the sentiment’s 180-degree reversal seems unstoppable at this juncture, led higher by all things AI and AI-related.
For investors who want to play the role of the tortoise, and not the hare, I believe TSX value stocks could be the way to go. A lot of the dividend payers on the Canadian exchange sport dividend yields slightly on the high side. And it’s these names that seem to be rich with value. You really don’t need to go digging into the depths of the TSX to get more yield for less, either!
Bond yields and risk-free rates have been so incredibly bountiful this year. Dividend yields in certain names have risen accordingly. Unlike bond yields and GIC (Guaranteed Investment Certificate) rates, top income stocks’ dividend yields, though swollen, are yours to keep based on your invested principal, regardless of where rates go in a year or two from now.
Enbridge stock: What a huge yield!
When rates steadily descend again, you’ll probably be happy to have picked up shares of a stock like Enbridge (TSX:ENB), whose dividend yield was north of 7%. Now, the midstream energy space has plenty of industry risks to consider. That said, I do think the discount on shares (down more than 18% from last year’s peak) should not be ignored by investors who may be tempted to chase capital appreciators that only seem to go up.
Enbridge may have faced pressures, but don’t count on management to backtrack on the dividend. I believe the company has been through far worse times. Think back to the depths of the COVID-19 pandemic and 2020 market crash. Enbridge stock has come a long way since those days. And though the trajectory may entail a revisitation to such levels, I’d argue that income seekers and shareholders should hope that shares fall. That way, they’ll be able to get even more yield for less!
The payout may be a bit stretched, but don’t count on management to reduce its commitment. Enbridge is one of those firms that would rather sell non-core assets and pull back on spending than break its commitment to shareholders. At the end of the day, a lot of ENB holders are in it for the income.
Bottom line
At $48 and change per share and 16.5 times forward price-to-earnings (more than 40 times trailing), the 7.3% dividend yield is just too attractive to ignore any longer. I’m no advocate of chasing yield, but Enbridge is a wonderful company with shares that just so happen to have a swollen yield as a result of pressures that should pass in due time.
