If you want to generate steady income from the Canadian stock market, you might want to consider investing in high-yield dividend stocks. High-yield stocks can significantly boost your income through regular payouts and also help you achieve your long-term financial goals.
An over 8% dividend yield is hard to come by, and when such opportunities arise, it’s better to act fast. One such dividend stock that is currently trading at an attractive dividend yield of 8.5% is Superior Plus (TSX:SPB). In this article, let’s look at why Superior Plus is a top dividend stock to buy right now and how it could sustain its high payouts in the future.
Superior Plus stock
Superior Plus is a Toronto-based company with a market cap of $2.1 billion as its stock trades at $8.51 per share after sliding by nearly 14% so far in 2024. The recent declines in its share prices, however, have made its annualized dividend yield look even more appealing at 8.5%.
This company primarily focuses on the distribution of propane, chemicals, and specialty products, serving residential, commercial, and industrial customers across North America. Besides its home market, Superior Plus generated more than 70% of its total revenue from the United States last year.
In 2023, the Canadian propane distributor’s revenue remained nearly flat on a YoY (year-over-year) basis at $3.4 billion. The strong performance of its recently acquired firm Certarus helped Superior post adjusted annual earnings of $0.23 per share, far better compared to its adjusted net loss of $0.58 per share in the previous year.
The growth story continues in 2024
In the first quarter of 2024, Superior posted record adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) of $235.6 million, up 15% YoY. Similarly, its adjusted EBITDA margin also saw significant expansion during the quarter. Despite challenging weather conditions, exceptional performance in its Certarus division and a resilient propane distribution business helped the company post strong results.
Although warmer weather posed challenges for Superior’s U.S. propane segment last quarter, the segment’s adjusted EBITDA still grew positively, reflecting its strategic adaptability and strong operational management.
As Certarus continues to witness a robust market demand for compressed natural gas (CNG), renewable natural gas (RNG), and hydrogen, Superior could continue to deliver strong EBITDA growth in the coming quarters as well.
Foolish takeaway
In addition to its continued focus on profitable growth, Superior Plus seems committed to effectively managing debt and maintaining a strong balance sheet. Over the last year (ended in March 2024), the company’s leveraged ratio has improved slightly from 3.9 to 3.8 times. The company expects this ratio to continue improving in the remaining quarters of 2024, with an aim to achieve a three times leverage ratio in the long term.
Moreover, the company’s diversified portfolio, encompassing propane, CNG, RNG, and hydrogen distribution, positions it well within the clean energy sector. As industries and consumers increasingly seek lower-carbon alternatives to meet their energy needs, Superior Plus is likely to witness strong financial growth in the years to come, which could also help the share prices of this high-yield dividend stock rally.
