Several dividend stocks trading on the TSX pay shareholders a high yield, but just a handful of these companies are good long-term investments. In addition to a high yield, you need to consider other factors such as a company’s payout ratio, balance sheet debt, capital expenditures, and the potential for earnings growth.
Here are three quality, high-dividend stocks that offer a yield of more than 4% in 2024.
Suncor Energy stock
A domestic energy heavyweight, Suncor Energy (TSX:SU) was forced to slash dividends by 55% four years back due to falling oil prices amid the COVID-19 pandemic. It reduced quarterly dividends from $0.465 per share in March 2020 to $0.21 in June 2020. However, as oil prices recovered, Suncor increased its quarterly dividend to $0.545 per share in 2024, indicating a yield of more than 4%.
In the fourth quarter (Q4), Suncor generated $4 billion in adjusted funds from operations, or $3.12 per share, while earnings stood at $1.6 billion, or $1.26 per share. In the December quarter, Suncor returned $1.1 billion to shareholders, including $704 million in dividends and $375 in share buybacks.
Suncor repurchased shares worth $2.2 billion last year, accounting for 4% of its outstanding shares, and used additional cash flows to reduce balance sheet debt. The company reported a free funds flow of $2.4 billion in Q4, indicating a payout ratio of less than 30%, providing it with the financial flexibility to target acquisitions, reinvest in growth projects, and strengthen the balance sheet.
In 2024, it expects capital expenditures between $6.3 billion and $6.5 billion, which should drive future cash flows higher. Priced at less than 10 times forward earnings, Suncor Energy stock is quite cheap and trades at a discount of 10% to consensus price target estimates.
Toronto-Dominion Bank stock
A TSX giant that currently offers a tasty dividend yield of 5%, Toronto-Dominion Bank (TSX:TD) stock is down 24% from all-time highs, allowing you to buy the dip. Despite a tepid lending environment, TD grew revenue by 5% year over year in fiscal Q2 of 2024 (ending in October) due to higher fee income, a contribution from TD Cowen, and higher volumes and deposit margins in segments such as personal and commercial banking.
Its steady top-line growth was offset by a higher provision for credit losses due to consumer credit normalization and commercial credit migrations.
TD ended the quarter with a CET1 (common equity tier-one) ratio of 13.9%, which is among the highest when compared to other Canadian banks.
Fortis stock
The final TSX dividend stock on my list is Fortis (TSX:FTS), which currently yields 4.4%. Fortis is a utility company, so its cash flows are regulated and predictable, allowing it to raise dividends for 50 consecutive years.
Fortis owns and operates electric and natural gas transmission and distribution systems in North America. In 2023, it invested $4.3 billion of capital in its energy systems while growing adjusted earnings per share by 9% year over year.
Priced at 16.6 times forward earnings, Fortis stock trades at a discount of 8% to consensus price target estimates.
