Investing in high-yielding dividend stocks would be an excellent strategy right now, as equity markets could remain volatile in the near term. The payout from these companies will help earn a stable income irrespective of market conditions. Meanwhile, the following three Canadian stocks offer dividend yields of over 7% and trade at attractive valuations, making them excellent buys.
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BCE
BCE (TSX:BCE), one of Canada’s top telecommunication players, is my first pick. It reported its fourth-quarter performance last week, with its revenue growing by 0.5% amid a solid favourable sales mix due to higher-value mobile phones and lower discounts. Meanwhile, its revenue from services declined marginally due to the decline in revenue from the Bell Media segment. Meanwhile, its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) grew by 5.3%. Its adjusted EBITDA margin also expanded by 1.9% due to the impact of cost-reduction initiatives and improvement in operating efficiencies.
The Montreal-based telco generated $1.29 billion of free cash flows, a substantial improvement compared to $376 million in the previous year’s quarter. The decline in capital expenditures and higher cash flows from operating activities boosted its free cash flows. The company has also raised its quarterly dividend by 3.1% to $0.9975/share, while its forward yield stands at 7.81%.
However, the company has announced a $1 billion reduction in its capital expenditure for the next two years and is undertaking restructuring initiatives, which could lower its workforce by 9%. The company has blamed the recent decision by the Federal government and CTRC (Canadian Radio-television and Telecommunications Commission) to allow smaller internet companies to temporarily utilize the fibre networks of large telecommunication companies to offer their services for the reduction in its capital expenditure. The decline in its capital expenditure and weaker 2024 guidance appears to have led to a 3.7% decline in its stock price since reporting its fourth-quarter earnings. It trades 16.8 times its projected earnings for the next four quarters, making it an ideal buy.
TC Energy
TC Energy (TSX:TRP), which operates low-risk and regulated midstream business and seven power-generating facilities with a total power-producing capacity of 4.3 gigawatts, is my second pick. With around 97% of its adjusted EBITDA generated from regulated assets and long-term contracts, the company’s financials are less susceptible to the broader market environment.
Amid its healthy cash flows, the company has raised its dividend for 23 years at an annualized rate of 7%. With a quarterly dividend of $0.93/share, it currently offers a forward yield of 7.22%. Further, the company is expanding its asset base and has planned to invest around $8-$8.5 billion this year and $6-$7 billion annually for the next two years. It has also strengthened its financial position through asset divestment initiatives. Amid its growth initiatives and strong financials, the company hopes to raise its dividend by 3-5% yearly in the coming years. Further, it also trades at an attractive NTM (next 12-month) price-to-earnings multiple of 13.1, making it an excellent buy.
NorthWest Healthcare Properties REIT
NorthWest Healthcare Properties REIT (TSX:NWH.UN) owns and operates 229 healthcare properties across eight countries. The increase in debt levels and higher interest expenses weighed on its financials, dragging its stock price down. It has lost over 55% of its stock value compared to its 52-week high and trades at an attractive price-to-book multiple of 0.5.
Meanwhile, the company has undertaken several initiatives, such as the disposition of non-core assets, financing, and dividend cuts, to lower its debt levels and strengthen its financial position. It continues to enjoy a healthy occupancy rate while its long-term contracts and inflation-indexed lease agreements stabilize its financials. Further, despite the dividend cuts, its forward yield currently stands at a juicy 8.24. Considering all these factors, I am bullish on NorthWest Healthcare despite the near-term volatility.
