Should You Buy the 3 Highest-Paying Dividend Stocks in the TSX Composite?

A high yield is a very attractive feature in a dividend stock, but you have to be sure it’s not a byproduct or a reflection of some underlying problems.

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The TSX Composite makes up about 70% of the entire stock market weight while representing less than 10% of the total securities listed on the TSX. This includes all the giants of different Canadian sectors and some of the most well-established Dividend Aristocrats. However, if your primary goal is to get the best possible yield, you may consider looking into three of the highest-yielding stocks from the composite.

A REIT

Real estate investment trusts, or REITs, are arguably the best market segment to explore for high yields, but the yield Allied Properties REIT (TSX:AP.UN) offers is quite high, even for a REIT. It has remained at this level for some time, thanks to the massive slump the REIT is still trying to break out of. At 10.4%, Allied Properties is currently one of the most generous dividend stocks in the TSX Composite.

Even though the yield seems dangerously high, the REIT has many good things going for it that make it a safe and compelling pick. The first is its position as one of the largest REITs by market cap and portfolio size. The second is its consistent dividend history. Lastly, despite its massive slump, the FFO payout ratio was safe (75.6%) for 2023.

A telecom giant

While it’s not the top 5G stock in Canada, BCE (TSX:BCE) is definitely the best pick for its yield from the telecom sector. The largest telecom company in Canada (by market cap) currently offers a mouthwatering yield of about 8.1%, thanks to its trading at a massive discount. The stock has lost over a third of its valuation from its 2022 peak.

BCE is a well-established Dividend Aristocrat that has grown its payouts for 14 consecutive years, and it has continued this tradition by growing its payouts by 3% between 2023 and 2024.

The three-cent climb is less than the company’s traditional five-cent hike, but this conservative growth approach endorses its long-term dividend sustainability. Plus, at its discounted price, you may also benefit from some recovery-fueled growth once the stock starts going up again.

An energy company

Enbridge (TSX:ENB), the pipeline and energy giant of Canada, is also one of the most coveted dividend stocks from the TSX Composite. The company has always been generous with its dividend growth. If we add its 69 years of dividend-payment history and 29 consecutive years of dividend growth to the equation, it becomes a compelling dividend pick in any market.

But it’s even more attractive now, thanks to a 19% discount that has pushed its yield up to 7.7%, which is exceptionally high for an aristocrat like Enbridge. As a pipeline business, it’s also financially safer than other energy businesses, and right now, it’s focusing on growing its natural gas business, which may prove beneficial in the long run.

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Foolish takeaway

All three of the high-yield dividend stocks from the TSX Composite have healthy business models, strong dividend payment and growth histories, and the payouts are financially sustainable, making them almost no-brainer dividend buys at their current, attractive 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 Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends Enbridge. The Motley Fool has a disclosure policy.

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