Top 5 Canadian Stocks With Sustainable Yields

Income investors should not gauge dividend stocks for their payment history alone but also for sustainable yields.

| More on:
woman data analyze

Image source: Getty Images.

The year is almost over, but the broader macroeconomic picture is still hazy, especially for income investors. If you’re buying stocks this month for passive income in 2024 and beyond, extend your criteria or parametres beyond dividend history or track record. The following are the Canadian stocks with sustainable yields.  

Recession resistant

Alimentation Couche-Tard (TSX:ATD) in the consumer staples sector is a very safe choice. At $77.59 per share, the 0.77% dividend offer is relatively low. However, the 13.31% payout ratio lends confidence to invest in the multinational operator of convenience stores. The $74.9 billion company has three popular brands under one umbrella.

This giant convenience retailer has established a global footprint. Its store count in 25 countries has grown to over 14,400 and expansion is non-stop. Couche-Tard’s chief executive officer (CEO), Brian Hannasch, told analysts recently the business is recession-resistant but not actually recession-proof.

Some belt-tightening by customers could impact the business. Nevertheless, Couche-Tard is rock steady, given its 31.51% year-to-date gain.     

Financial

The financial sector, composed of banks and insurance companies, has the most significant percentage weight on the TSX. Its constituents account for 35.44% of the index. Canada’s banking sector is a bedrock of stability. National Bank of Canada (TSX:NA) is the sixth-largest bank and a logical choice in a higher-for-longer interest rate scenario.

Besides the 4.51% yield and 42.43% payout ratio, the $31.7 billion bank has been generous with dividend hikes in the last five years. Laurent Ferreira, NA’s president and CEO, said the bank commits to maintaining a defensive posture and prudent approach to capital, credit, and cost management in fiscal 2024

Manulife Financial (TSX:MFC) is the next-best choice in the financial sector. The $48.75 billion iconic insurer and financial services company has a dividend-growth streak of eight years. It currently pays a juicy 5.44% dividend, with a corresponding payout ratio of 40.33%. At $26.82 per share, the iconic insurer is up 17.55% year to date.

Energy

A Canadian’s stock portfolio won’t be complete without an energy stock. The sector’s percentage weight on the TSX is 17.27%. A no-brainer choice is Canadian Natural Resources (TSX:CNQ). This top-tier energy constituent trades at $85.09 per share (+18.66 year to date) and pays a hefty 4.7% dividend.

The $92.5 billion oil & gas producer is a Dividend Aristocrat owing to 22 consecutive annual dividend increases. Also, the quarterly dividend should be sustainable considering the 54.87% payout ratio. Since July 2021, the company has alloted 50% of its free cash flow to share repurchases.

Industrial

Industrial is the third-largest sector on the TSX (10.58%), and Finning International (TSX:FTT), the world’s largest Caterpillar dealer, is the standout. The $5 billion Canadian firm raised dividends for 20 consecutive years. At $34.63 per share (+5.67% year to date), the yield is a decent 2.89%, while the payout ratio is a low 25.38%.

Its president and CEO, Kevin Parkers, said the team’s game plan is to drive product support, full-cycle resilience, and sustainable growth. He added that the business enjoys continued momentum with robust customer activity in Finning’s diverse end markets.

Choose wisely

The Bank of Canada held interest rates steady again in December 2023, but the policymakers will stick to a tight monetary policy in the new year. Hence, dividend earners must ensure their chosen stocks can sustain their yields.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alimentation Couche-Tard. The Motley Fool recommends Canadian Natural Resources. The Motley Fool has a disclosure policy.

More on Dividend Stocks

money cash dividends
Dividend Stocks

Beat the Dow Jones With This Cash-Gushing Dividend Stock

Here's why this high-dividend TSX stock should beat the Dow Jones index in 2024 and beyond.

Read more »

Pixelated acronym REIT made from cubes, mosaic pattern
Dividend Stocks

The Top Canadian REITs to Buy in February 2024

Are you looking to boost your income and buy some stocks at a bargain? Here are three top REITs that…

Read more »

calculate and analyze stock
Dividend Stocks

Better Buy in 2024: Canadian Utilities Stock vs. Enbridge Stock

Dividend stocks like Enbridge (TSX:ENB) and Canadian Utilities (TSX:CSU) are staples of Canadians' portfolios.

Read more »

Increasing yield
Dividend Stocks

2 No-Brainer High-Yield Dividend Stocks to Buy Right Now for Less Than $1,000

Got $1,000? Here are two no-brainer stocks to buy now at their lows and start getting immediate returns of $75.

Read more »

Gas pipelines
Dividend Stocks

Is Keyera a Buy After Its Solid Fourth-Quarter Earnings?

Given Keyera's solid quarterly performance and healthy growth prospects, I am bullish on it.

Read more »

data analyze research
Dividend Stocks

Canadian Tire 2023 Earnings: Better Days Ahead

Weak consumer demand led to a drop in Canadian Tire's earnings. Investors need patience to enjoy better days with the…

Read more »

Economic Turbulence
Dividend Stocks

Intact Financial Climbs to All-Time High on Buybacks, With an 11% Dividend Increase

Intact stock (TSX:IFC) rose after the company reported a difficult year, but managed to increase buybacks and its dividend.

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

Manulife Stock Raises Dividend by 9.6% on Good Earnings in 2023

Manulife stock jumped almost 9% after earnings as it was too cheap to ignore! Its dividend yield is not bad,…

Read more »