Identifying the right high-yielding stock is just one piece of the puzzle. Identifying the right time to buy those high-yield stocks is also quite important. If you can buy these stocks discounted, you can lock in a good yield, making your long-term return potential even more compelling.
Other variables that you should consider when choosing a high-yield stock include sustainability and capital-appreciation potential.
Two high-yield dividend stocks appear to be amazing buys for the month of July.
An energy stock
The TSX has a healthy selection of powerful energy stocks, each with its own strengths and weaknesses, but few stocks stand out as much from the crowd as the leader of the pack (by market cap) Enbridge (TSX:ENB). It’s more than just the largest energy stock in Canada, but also the largest pipeline company in North America and one of the largest in the world.
It transports a substantial segment of the oil produced in Canada and the gas consumed in the U.S. every year. It has also diversified into the gas utility business, where it dominates part of the local market. The company is also expanding into renewables, but the scale of those investments, though compelling, is not yet on par with its conventional energy assets.
As a stock, Enbridge is beloved more for its dividends than its capital-appreciation potential, but that hasn’t always been the case. Before the 2014-2015 sector-wide fall from which the stock has yet to recover, it was a decent growth stock. It may follow the same pattern again in a long-term energy bull market, but its mouthwatering 7.2% yield is reason enough to consider this stock.
The yield is high but not rare in the Canadian market. However, few stocks with Enbridge’s dividend pedigree and aristocratic status in Canada and the U.S. tend to offer such a high yield. It’s thanks to its generous payouts and partly the consequence of an almost 15% discount the stock is trading at.
A telecom stock
The telecom sector in Canada is generally considered stable, mostly thanks to the highly consolidated nature of the sector. There are three major players, each offering similar services and each dominant in a specific geographic market or telecom service segment. BCE (TSX:BCE), even though it’s not the largest telecom company in Canada by the number of users, is the largest player by market cap.
It’s also the top pick when it comes to dividend yield. The BCE dividend yield already stands out from the other two telecom giants, but now that it’s trading at a healthy 18.5% discount from its 2022 peak, the current yield has risen up to an even more attractive level of 6.4%. It also has a long and proud history as a Dividend Aristocrat, making its dividends not just generous but also sustainable in the long term.
Foolish takeaway
The two blue-chip stocks and Dividend Aristocrats can be powerful additions to your portfolio. If you are keeping them in your Registered Retirement Savings Plan, they can help generate income for your other investments or, with a dividend-reinvestment plan, increase the size of their stake. If you are stashing them in your Tax-Free Savings Account, you can start a healthy dividend-based income.
