Don’t Miss These Top Dividend Stock Opportunities Today

High-yield dividend stocks usually have a little more risk attached to them, but some, like Enbridge stock, have a strong investment case.

Karen Thomas, MSc, CFA ❯

Karen is a stock market enthusiast focused on uncovering those stocks that she believes the market has mispriced. She does this through fundamental and quantitative analysis of companies and their industries, as well as a study of future opportunities and trends. She holds a Masters degree in Finance, the CFA designation, and has over 20 years of experience in the investment management industry. Having worked at a major pension fund, as well as two leading mutual fund firms as an analyst and portfolio manager, she has solid investing expertise which she aims to share with her readers.

Published September 7, 2023 4:15 pm EDT

Dividend stocks have long been an excellent way to generate some extra income. Today, many dividend stocks have very juicy yields, as stock prices have headed lower. While some are of low quality and too risky, some of these high-yield dividend stocks are interesting opportunities now.

Here are three top dividend stocks with juicy yields that can provide you with generous income.

Enbridge stock: Trading at 52-week lows and yielding 7.8%

Enbridge (TSX:ENB) is one of North America’s leading energy infrastructure companies. It has a history of providing reliable, predictable, and growing cash flows over time. Today, Enbridge is yielding 7.8% after Enbridge’s stock price has fallen 16% in the last year. Enbridge’s recent stock price weakness has been due to slowing earnings, high debt, and a very high dividend-payout ratio.

These factors should not go unnoticed, but Enbridge has a few other things going for it. For example, Enbridge is well diversified. In the news this morning was its $14 billion bid for three natural gas distribution utilities from Dominion Energy. This acquisition will result in even more diversification for Enbridge — away from liquids and pipelines. After the acquisition, approximately 50% of its earnings before interest, taxes, depreciation, and amortization will come from natural gas and renewables. Also, this acquisition gives Enbridge regulated utility cash flow — in other words, additional low-risk revenue. It also increases its “cleaner energy” weighting.

So, despite the additional debt and the worry that this acquisition has fueled, I think that this was a defensive move in an increasingly precarious environment. It’s Enbridge’s way to ensure its future in a world that’s slowly transitioning toward cleaner energy.

Freehold Royalties has a 7.35% dividend yield

Another top dividend stock that I’d like to discuss is Freehold Royalties (TSX:FRU). Freehold is a Canadian oil and gas company that’s engaged in the production and development of oil and natural gas. The trust’s objective is to “deliver growth and lower-risk, attractive returns to shareholders over the long term.”

Freehold’s dividend yield of 7.35% is backed by its low-risk royalty business model, a diversified portfolio of royalty assets, and strong balance sheet. In its latest quarter, production on its assets increased 9%, and leasing activity was very strong. This means that looking ahead, volumes are expected to be strong, boosting revenue and cash flows in the years ahead.

Northwest Healthcare Properties REIT

The last top dividend stock on my list, Northwest Healthcare Properties REIT (TSX:NWH.UN) has an 11.94% dividend yield — and a little higher risk. The concern here is that leverage is high. Also, dividend payments exceed the company’s earnings, which is never a good thing. Yet I believe in the long-term value of the real estate investment trust (REIT) and its assets. Thus, in my view, the stock is severely oversold.

There are a few points that have brought me to this conclusion. And these points leave me comfortable with the risk/reward tradeoff on the stock. For example, Northwest is the owner and operator of healthcare properties around the world — a highly defensive business. Also, the weighted average lease expiry is 13.5 years. Finally, revenues are inflation indexed.

In my view, despite the risk that higher interest rates bring, Northwest has an attractive underlying business. This is evident in the company’s revenues and net operating income, which have been strong. For example, in the most recent quarter, revenue increased 13%. This followed a 29.5% increase in revenue in the prior quarter. Also, net operating income increased 10% in the most recent quarter, and occupancy was a very strong 96%.

The current 12% dividend yield is a reflection of the fact that high rates are hitting the company’s net income and sending the payout ratio to unsustainable levels (well over 100%). However, the company has been taking steps to fix this, such as hedging its interest rate exposure, non-core asset dispositions, and aggressively buying back shares. Also, a strategic review is underway to find ways to unlock value. While there certainly is risk here if the REIT cannot improve its financials, the risk/reward trade-off is attractive.