Just because hockey season is over doesn’t mean Canadians shouldn’t seek high-yield stocks and REITs (real estate investment trusts) that can help their portfolios go on a passive income powerplay! Indeed, the days of high rates may last a while longer. But over the long haul, they are poised to go down, assuming inflation continues to back off.
Now, there’s still a great deal of unknowns regarding rates and inflation. Though inflation has dropped like a rock in recent quarters, the last push (from 3% to around 2%) could take a whole lot more effort than the push from peak inflation to where it’s sitting today, just shy of the 3% mark. Indeed, there’s some degree of discretion when it comes to the central banks. However, I’d argue that it’s inflation that calls the shots.
We could live with 2.9% inflation, but I think many Canadian consumers who are fed up with paying more for things that don’t offer more value would rather inflation be returned to normal. Heck, inflation below 2% may be desired after what hard-hit Canadians have been through of late.
In any case, it will be interesting to see where inflation and rates go from here. If the coming monthly inflation data doesn’t play ball, perhaps the Bank of Canada should play it by ear concerning its next round of rate cuts. At the end of the day, inflation can potentially be very sticky. And what remains of inflation may be most difficult to unstick!
In any case, here are two intriguing non-tech high-yielders worth checking in with this July.
Enbridge
Enbridge (TSX:ENB) is a midstream energy firm with a $103.8 billion market cap and a 7.48% dividend yield. Undoubtedly, it’s been a rough going for ENB stock in the past five years. Despite clocking in just 2.6% returns in the past five years, investors have been spoiled with the dividend. Looking ahead, it’s poised to keep growing, even if rates and industry headwinds stay higher for longer.
With the stock gaining impressively since October 2023, I view ENB stock as in the early innings of a new bull run. If ENB stock is in a new bullish uptrend, it’s sure to be a choppy ride, but for value investors seeking yield at a discount (18.4 times trailing price to earnings at the time of writing), I view ENB stock as a name still worth stashing away from the long haul. After all, you’re getting paid quite a bit to wait for Enbridge to turn a corner.
SmartCentres REIT
If you think inflation will return to 2% or less in the next two years, the following high-yield plays, specifically REITs, seem worth hunting down. Sure, many such REITs have backtracked since the last inflation number, which seems to have pushed further cuts further into the future.
That said, any month-to-month reactions in rate-sensitive securities to such economic data are probably more overreactions than anything. SmartCentres REIT (TSX:SRU.UN) has been endlessly rocked in recent years. However, I think the name is nearing some sort of bottom as rate-cut hopes begin to overtake the “higher for longer” worries.
If rates stay higher for a few more quarters, Smart will still be on track to keep paying its distribution, which now yields 8.34%. It’s a colossal payout, but one that’s safer than it seems. Now down around 43% from all-time highs, SRU.UN may be the high-yield retail REIT to watch closely as the headwind of high rates slowly but surely fades away. If you want income and foresee lower rates in the coming years, perhaps there’s no better income investment to have on your radar.
