The 6.6% Dividend Stock Set to Dominate the TSX

A high-yield dividend stock whose business could benefit from industry tailwinds is an excellent pick for income investors.

| More on:
A sapling regrows in a forest that has been logged.

Source: Getty Images

Every country, including advanced economies, has concerns that need fixing without delay. In Canada, the housing shortage is one of the major predicaments. The federal government, the private sector, and other stakeholders must collaborate to solve a looming crisis.

The Bank of Canada’s move to lower interest rates and, hopefully, make more cuts in the ensuing months should provide relief and reduce homeownership costs as well. On the investment front, the lumber industry, in general, and Acadian Timber (TSX:ADN), in particular, could benefit immensely from tailwinds relating to the housing shortage.

Also, this high-yield Canadian stock could be the top-of-mind choice of income investors. ADN could dominate the TSX in 2024 and beyond. At $17.50 per share, the dividend yield is a generous 6.6%. Given the 66.7% payout ratio, the quarterly payouts are well-covered by earnings and should be relatively safe.

Timberland owner

The $304.4 million owner of timberland manages around 1.1 million acres of freehold timberlands in New Brunswick (segment 1) and Maine (segment 2), and provides timber services. It also supplies forestry products in Eastern Canada and the Northeastern United States.

Acadian Timber sells softwood and hardwood sawlogs, pulpwood, and biomass by-products to regional customers. The company also develops carbon credits for sale in voluntary carbon credit markets. In Q1 2024, management achieved the first significant sale of carbon credits.

Investment takeaways for Acadian Timber include diversified end-use markets, variable cost structure with minimal capital requirements, and growth opportunities through strategic acquisitions. Its sustainable harvesting plans support cash flow stability, while renewable resources could provide perpetual returns.

Financial performance

In the three months ending March 31, 2024, timber sales (and services) and net income increased 6.8% and 7.2% to $23.9 million and $6 million, respectively, compared to Q1 2023. Free cash flow (FCF) jumped 108.7% year-over-year to $7.8 million. According to management, timber sales volumes reached 247,000 cubic metres (a 35% year-over-year increase) due to increased contractor availability.

Acadian President and CEO Adam Sheparski said, “Achieving our first significant sale of carbon credits, entering a renewable energy option to lease, and purchasing additional timberlands in New Brunswick, together with solid results from our timber operations, resulted in a compelling first quarter of 2024.”

“Rebounding timber sales volumes stemming from the hard work by the Acadian team to improve contractor availability and the pending monetization of our remaining registered carbon credits are expected to result in a robust fiscal 2024,” Sheparski added.

Q1 2024 was also the first reporting period for Acadian’s carbon credit project. The company agreed to sell 752,000 registered voluntary carbon credits in Maine. Acadian Timber expects to generate an additional 1.1 million credits over a 10-year crediting period.

Moreover, Acadian executed an agreement for the option to lease around 10,000 acres of its Maine timberlands. The purpose is to develop, construct, operate, and maintain a solar-powered electric generating facility. 

High demand for years

Acadian Timber maintains a positive outlook owing to the rate-cutting cycle in Canada and the stability of the northeastern forestry sector across the border. Other compelling reasons to invest in the stock are the improving long-term demand for new homes, and repair and remodel activity. Its products should be in high demand for years.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Dividend Stocks

a person watches a downward arrow crash through the floor
Dividend Stocks

Why This Canadian Sector Is Plummeting and How to Protect Your Portfolio

There's one sector that's seriously in trouble lately, but don't worry. We have you covered with more stocks to consider.

Read more »

Man looks stunned about something
Dividend Stocks

Will Tariffs Crush These Canadian Manufacturing Stocks?

These three manufacturing stocks have already gone through some turbulence, but some might fare better than others.

Read more »

Pile of Canadian dollar bills in various denominations
Dividend Stocks

Got $3,000? 3 Income Stocks to Buy and Hold Forever

The TSX has no shortage of high-yielding dividend stocks to choose from. Here are three top picks to add to…

Read more »

Dividend Stocks

Top Canadian Stocks to Generate Passive Income in 2025

These Canadian dividend stocks could help you earn attractive passive income for years to come.

Read more »

ways to boost income
Dividend Stocks

Top Canadian Financial Stocks to Buy Now

Canada's financial stocks are regarded as some of the best investments to own. Here's a look at several to buy…

Read more »

Start line on the highway
Dividend Stocks

10 Years From Now, You’ll Be Glad You Bought These Magnificent TSX Dividend Stocks

Investing in dividend stocks for the long term can be rewarding, especially if they grow their dividend annually.

Read more »

Canadian dollars are printed
Dividend Stocks

Transform Your TFSA Into a Cash-Generating Machine With $10,000

Here's how Canadian TFSA investors can hold TSX dividend stocks and begin a passive-income stream in 2025.

Read more »

The sun sets behind a power source
Dividend Stocks

Fortis: Buy, Sell, or Hold in 2025?

Fortis is up 8% in 2025. Are more gains on the way?

Read more »