Canadian investors love their dividends. And what they love the most are high-yield dividends. However, there are some sectors that simply are not able to stand the test of time. And, in fact, could see a drop in dividends in the near future. This is why today, we’re going to look at one dividend stock I would avoid for now and two others that could be a far better long-term bet.
Avoid telecom
There are quite a few industries that could end up with weaker performance in the long term. But one of the biggest hits could be among legacy media and telecommunication companies. Traditional print media and broadcast television may continue to decline as consumers increasingly turn to digital platforms for news and entertainment. Furthermore, companies focused on landline services may struggle as consumers and businesses transition to mobile and internet-based communication.
One of these companies continuing to struggle is BCE (TSX:BCE). BCE operates in a highly competitive industry alongside other major telecom players. Intense competition can lead to pricing pressures and the need for continued investments in infrastructure and technology to maintain market share.
We’ve already seen this, with regulations from the Canadian Radio-television and Telecommunications Commission (CRTC) putting pressure on BCE stock. All while the company has seen revenue decline after large profits in the pandemic. So, while BCE stock does hold a strong market position and is shifting towards other revenue methods, there are many reasons to avoid the stock—even with a dividend yield of 8.6%.
Other sectors
It’s not all doom and gloom. In fact, there are sectors you can buy into right now for high dividend yields. Yet, for the biggest and best, I would look to promising real estate investment trusts (REITs). REITs typically own and manage income-generating properties such as office buildings, retail centres, and apartment complexes. They often distribute a significant portion of their income to shareholders in the form of dividends.
In particular, I would consider companies in infrastructure and industrial properties. Infrastructure companies involved in sectors like transportation, toll roads, and pipelines often generate stable cash flows and may offer attractive dividend yields. Meanwhile, industrial properties support the growth from e-commerce as well as supply-chain demands.
Two dividend stocks
For infrastructure, I would consider Brookfield Infrastructure Partners (TSX:BIP.UN). BIP.UN owns and operates a diversified portfolio of high-quality infrastructure assets globally, spanning sectors such as transportation, energy, utilities, and data infrastructure. This diversification helps reduce risk and provides stability to its cash flows.
Many of BIP.UN’s assets operate under long-term contracts or regulatory frameworks, providing predictable and stable cash flows. These contracts often include inflation escalators, which can help protect against inflationary pressures. Meanwhile, BIP.UN stock offers a 5.35% dividend yield, with shares up 40% since 52-week lows.
Finally, Granite REIT (TSX:GRT.UN) primarily focuses on owning and leasing industrial real estate properties, including warehouses, logistics centres, and distribution facilities. Industrial real estate has experienced strong demand in recent years due to e-commerce growth and supply chain dynamics.
GRT.UN’s tenant base includes a diverse mix of tenants, including e-commerce companies, logistics providers, and manufacturing firms. This diversity helps mitigate tenant concentration risk and enhances stability. It’s also geographically diverse, with stable cash flows on hand. So, with a dividend yield at 4.65% and shares up 12% from 52-week lows, it looks like a strong investment to consider as well.
