Good news greeted investors as the Bank of Canada lowered the benchmark interest rate to 4.25%, the third time since June this year. Analysts at Canadian Imperial Bank of Commerce said the time to invest in dividend stocks is now.
Falling interest rates have changed the investment landscape, and CIBC thinks the funds will land on high-yield Canadian dividend stocks. The passive-income investing trend should intensify as bigger rate cuts come.
Anyone with capital to invest can aim for a specific amount. Earning $750 extra monthly is possible if the investment amount is $135,345 and the dividend yield is 6.65%. If investing the lumpsum amount is not possible, you can accumulate shares of Automotive Properties (TSX: APR.UN) and Rogers Sugar (TSX: RSI) and hit your financial target over time.
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Strong fundamentals
CIBC said sectors like utilities, telecoms, and financials, not to mention real estate investment trusts (REITs), have added appeal of better-than-average business and earnings stability following the rate cuts. Automotive Properties is an excellent option because of the automotive industry’s strong fundamentals and favourable business outlook.
The $578.85 million REIT owns income-producing automotive dealership properties in strategic locations across Canada’s urban centres. At $11.80 per share, current investors enjoy a 15.25% year to date on top of the lucrative 6.81% dividend. But are the payouts safe?
Automotive Properties has been paying monthly cash dividends since 2015. Assuming you utilize your $7,000 Tax-Free Savings Account (TFSA) to invest in this REIT, your money will generate $39.73 in tax-free monthly income ($476.70 annually).
The leasing activity thrives in 2024, as evidenced by the financial results. In the first half of 2024, rental revenue and net operating income (NOI) increased 2.4% and 1.7% year over year to $46.9 million and $39.7 million, respectively. Net income jumped 53.7% to $58.2 million from a year ago.
Milton Lamb, chief executive officer (CEO) of Automotive Properties, said the fixed and consumer price index-linked annual rent escalations in the lease contracts helped generate higher NOI. The REIT acknowledges that Canada’s automotive dealership industry remains highly fragmented. It expects continued mid- to long-term consolidation due to increased industry sophistication and growing owner-operator capital requirements.
Stable as ever
Rogers Sugar, a consumer staples stock, is a defensive holding for risk-averse investors. Its share price hardly fluctuates regardless of the economic environment. More importantly, the quarterly dividend payouts are stable and uninterrupted. At only $5.55 per share (+6.56% year to date), the dividend offer is a juicy 6.49%.
Mike Walton, president and CEO of Rogers and Lantic, said, “Our emphasis on optimizing the business to generate consistent, profitable and sustainable growth once again delivered strong results.” In the first three quarters of 2024, total revenues climbed 12.81% year over year to $898.7 million, while net earnings dipped 11.9% to $35.2 million from a year ago.
Walton added that the Leap Project has begun. The expansion project aims to enhance the production and logistic capacity of Rogers’s eastern sugar refining operations in Montréal and Toronto. It should provide around 100,000 metric tons of incremental refined sugar capacity to Canada’s growing market.
Gold standard
Dividend stocks remain the undisputed gold standard of passive-income investing. You don’t need substantial to get started. Accumulate shares of high-yield stocks like Automotive Properties and Rogers Sugar, whose average yield is 6.65%, to earn $750 monthly eventually.
