Top dividend-paying stocks, particularly those offering high yields, have always been solid investments for investors seeking a reliable source of passive income. Further, as the Bank of Canada has started to ease its monetary policy, these stocks look even more attractive due to their higher yields than traditional debt-based investments.
With this backdrop, let’s explore three Canadian stocks with fundamentally strong businesses, high yields, and reliable payouts.
Scotiabank
Investors looking for high-yield stocks could consider buying Scotiabank (TSX: BNS) stock. With a long history of dividend payments that stretches back to 1833, this leading Canadian bank has a solid reputation for rewarding its shareholders.
Scotiabank is known for consistent dividend growth. Besides its solid dividend payment history, the bank has increased its dividends at an impressive compound annual growth rate (CAGR) of 6% since 2013. This growth is backed by the bank’s broad range of products and services, its presence in fast-growing markets, strong deposit growth, and a robust balance sheet, all of which contribute to higher earnings and dividend payments.
At present, Scotiabank offers a quarterly dividend of $1.06 per share, which translates into a high yield of 6.1%. Further, the bank’s efforts to diversify its revenue, improve efficiency, and produce earnings-per-share (EPS) accretive investments and stable credit performance should further support its ability to sustain and grow its payouts over time.
From a valuation perspective, Scotiabank is also a good deal. Its stock trades at a forward price-to-earnings (P/E) multiple of 10.3 and a price-to-book (P/B) value ratio of 1.1. These figures are lower than those of its peers, indicating that the stock may be undervalued, offering investors an excellent opportunity to buy in at current levels.
Enbridge
With a high yield of 6.7% and a stellar track record of dividend payments and growth, Enbridge (TSX: ENB) is a top TSX stock for income investors. This energy company has been paying dividends for more than 69 years. Moreover, it consistently raised its dividend at a CAGR of 10% over the last 29 years.
Enbridge’s ability to maintain and increase its dividends is backed by its growing earnings and distributable cash flow (DCF). The company’s diversified revenues, investments to grow its conventional and clean energy asset base, long-term contractual arrangements, and focus on low-risk, low-capital projects augur well for future growth. Moreover, accretive acquisitions will support its earnings in the coming years.
The energy infrastructure company forecasts mid-single-digit growth in its earnings per share (EPS) and DCF per share in the long run. This will enable Enbridge to grow its dividends consistently at a healthy pace. Its durable payouts and visibility over future EPS growth make Enbridge a solid high-yield dividend stock.
Telus
Shares of telecom giant Telus (TSX: T) should be on your radar if you are seeking high and reliable yields. Telus’s ability to consistently grow its earnings through cost efficiency provides a strong foundation for higher dividend payments.
Since 2004, Telus has returned an impressive $21 billion to its shareholders through dividends. In the second quarter of 2024, the company announced a dividend of $0.39 per share, marking a 7% increase compared to the previous year. What makes Telus particularly attractive is its commitment to semi-annual dividend hikes. Telus aims to increase payouts by 7-10% annually as part of its long-term dividend growth strategy.
The company also maintains a sustainable payout ratio, distributing 60-75% of its free cash flow as dividends.
Telus’s ongoing investments in its PureFibre Network and 5G infrastructure are key factors supporting its future earnings growth. The company also focuses on high-growth sectors like digital transformation and cybersecurity, which are expected to drive long-term growth and further strengthen its dividend-paying capacity. Currently, Telus offers a solid dividend yield of 6.9%, making it an attractive option for income-focused investors.
