8.9% Dividend Yield? I’m Buying This TSX Passive-Income Stock in Bulk!

Are you looking for passive income that lasts? Consider this stock with a high dividend yield and a supported payout ratio.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Dividend stocks are fantastic for creating compound wealth. That’s because reinvesting those dividends can supercharge your returns. For example, historically, the S&P 500 has returned about 10% annually. Yet, if you reinvested dividends, your returns could jump closer to 12%. Over time, that extra 2% can result in a significantly larger portfolio. Thus helping investors grow their wealth much faster!

Be careful

While high dividend yields can be tempting, these are not always a sign of a great investment. Often, a high yield can be the result of a company’s falling stock price. And this might signal financial trouble. In these cases, the dividend might not be sustainable, and the company could cut or eliminate it altogether, thereby leaving investors with less income than they anticipated.

Additionally, focusing only on high yields might lead investors to overlook companies with lower, more sustainable dividends that offer long-term growth potential. It’s important to strike a balance. Choosing dividend stocks that not only offer reasonable yields but also have solid fundamentals and the ability to grow their payouts over time. That way, you’re setting yourself up for steady, reliable income rather than chasing unsustainable high yields.

A stock to watch

Diversified Royalty (TSX:DIV) on the TSX could be a great investment if you’re looking for a reliable income stream without the risk associated with overly high yields. DIV focuses on acquiring royalty streams from stable businesses. This means it has consistent cash flow coming in from a range of sectors. The diversified approach helps reduce risk since it’s not reliant on just one company or industry. Plus, its business model is designed to generate steady revenue. And this, in turn, supports regular dividend payments.

Created with Highcharts 11.4.3Diversified Royalty PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

Another reason DIV stands out is its attractive dividend yield, which is sustainable thanks to its diversified portfolio and conservative payout ratio. Instead of chasing sky-high yields that might be unsustainable, investors in DIV can benefit from a well-managed company with a focus on delivering consistent dividends. This makes it a solid choice for investors who want to strike the right balance between yield and long-term dividend growth.

Growth and stability

DIV now offers investors a stable and growing income stream through its diversified portfolio of royalty assets. With a dividend yield of around 8.86% at writing, it’s an attractive option for income-focused investors. In the second quarter of 2024, DIV reported a revenue increase of 18.6% year over year, reaching $16.8 million. Thereby showcasing its steady growth. The company’s payout ratio of 88.6% reflects a healthy balance between rewarding shareholders and sustaining long-term growth.

One of the standout features of DIV is its focus on stable, royalty-generating businesses. This provides consistent cash flow to support its dividend payments. For the first half of 2024, distributable cash grew by 13.9% to $21.2 million, demonstrating its ability to generate reliable income even in volatile markets. With a diversified portfolio and a commitment to growing shareholder returns, DIV remains a compelling choice for those looking to balance income and growth.

Should you invest $1,000 in Berkshire Hathaway right now?

Before you buy stock in Berkshire Hathaway, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Berkshire Hathaway wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $20,697.16!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 29 percentage points since 2013*.

See the Top Stocks * Returns as of 3/20/25

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 Amy Legate-Wolfe 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.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Dividend Stocks

analyze data
Dividend Stocks

How I’d Invest $28,000 in Canadian Natural Resource Stock to Amass Personal Wealth

Investing in TSX dividend stocks such as Enbridge can help you earn a passive-income stream in 2025.

Read more »

hand stacks coins
Dividend Stocks

Got $400? How I’d Start Building Income With 3 High-Yield Stocks for the Long Term

These high-yield dividend stocks have a solid payout history, making them compelling investments to generate passive income.

Read more »

A close up color image of a small green plant sprouting out of a pile of Canadian dollar coins "loonies."
Dividend Stocks

I’d Put $15,000 in These 3 Dividend-Growth Champions for Increasing Income Potential

Want to offset some volatility? Here are three defensive dividend-growth champions that can generate a juicy yield right now.

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

Transform Your TFSA Into a Cash-Creating Machine With $7,000

Discover how the Tax-Free Savings Account can be your golden goose for generating cash without losing your investment.

Read more »

monthly desk calendar
Dividend Stocks

How I’d Invest $10,000 in Canadian Value Stocks for Monthly Dividend Income

A $10,000-diversified portfolio of value stocks focusing on dividend safety, yield, growth, and payment schedules can provide a reliable source…

Read more »

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

Is This Correction Your Chance? Top 4 Canadian Dividend Stocks on Sale

Stocks may be down, but now is your chance to get some of these top dividend stocks on sale.

Read more »

Confused person shrugging
Dividend Stocks

Where to Invest $2,500 in the TSX Today

These TSX stocks offer attractive dividends and a shot at decent upside on a rebound.

Read more »

Pile of Canadian dollar bills in various denominations
Dividend Stocks

Invest $25,000 in These Dividend Stocks for $1,956.66 in Annual Passive Income

Dividends stocks can make a huge difference, even if shares don't move an inch. And these might be the best.

Read more »