There’s no question that high-yield dividend stocks are some of the most intriguing investments you can buy due to the significant passive income they can provide and the fact that they usually offer higher yields when trading at cheap valuations.
So, although stocks across the board have struggled for several years now thanks to many significant macroeconomic factors such as the pandemic, supply-chain issues, surging inflation and rapidly rising interest rates, we may finally be turning the corner after the Bank of Canada elected to begin reducing interest rates this week.
This makes high-yield stocks some of the best investments to consider today, especially before they begin to rally and recover, which will not only make them more expensive but will also cause their yields to begin to fall.
It’s worth noting, though, that as appealing as high-yield stocks are, the most important factor when investing in any company is finding a reliable business you can buy and hold with confidence.
It’s far better to buy a stock with a slightly lower yield but much more reliability than buying the highest-yielding stocks on the market that come with considerable risk and could end up falling significantly in value.
So, with that in mind, if you’re looking for some of the best high-yield dividend stocks to buy on the TSX today, here are two to consider before they get more expensive.
A top Canadian utility stock that continues to strengthen its operations
It’s well-known that utilities are some of the best dividend stocks investors can buy. However, you cannot often buy a high-quality utility like Emera (TSX:EMA), while it offers a yield of more than 6%.
Therefore, while Emera continues to trade off its 52-week high and offer such a compelling dividend yield, it’s certainly one of the best high-yield dividend stocks to buy now.
There are a few reasons why Emera is trading cheaply today and offering such an attractive yield. Firstly, higher interest rates have impacted the valuation of all utility stocks. Not only does it make debt more expensive, which can impact profit margins, but higher interest rates also cause dividend yields to rise, driving down the share prices of dividend stocks.
However, with interest rates peaking this year and the Bank of Canada starting to reduce the cost of borrowing, Emera could see a prolonged rally.
Furthermore, the stock has been divesting some of its non-core assets in recent quarters, improving its financials and setting itself up for significant growth potential over the coming years.
Utilities have typically always had consistent growth potential, albeit at a slower pace than some of the top growth stocks on the market. Nevertheless, the long-term growth potential, coupled with consistent dividend increases each year, make utility stocks like Emera some of the best long-term investments you can buy.
Furthermore, as we continue to transition to cleaner energy sources, utilities like Emera have a tonne of potential to increase capacity and grow their operations as the demand for electricity inevitably grows.
Therefore, while the stock is cheap and offers a current yield of more than 6%, it’s certainly one of the best high-yield dividend stocks to buy now.
One of the best high-yield dividend stocks in Canada to buy now
In addition to Emera, Enbridge (TSX:ENB) is another attractive high-yield dividend stock to buy now for several reasons.
Firstly, its massive, essential and well-diversified operations make Enbridge an extremely reliable stock. Plus, because it owns long-life assets such as pipelines and energy storage facilities, it generates billions in cash flow yearly, allowing it to increase its dividend consistently.
In fact, not only does it offer investors a yield of roughly 7.4% today, but Enbridge has also increased that dividend for 29 consecutive years, one of the longest dividend-growth streaks in Canada.
Furthermore, not only is Enbridge one of the most important energy infrastructure stocks in North America today, but it also continues to invest in future growth, especially in green energy.
Therefore, considering it pays a significant dividend that grows every year and has cash left over to invest in growing its business, there’s no question that it’s one of the best high-yield dividend stocks to buy now before it continues to rally.
