If you’re looking for huge passive income, Canada’s dividend heavyweights are worth looking into while their yields are still on the high side of their historic range. Indeed, interest rates may be coming down as the Bank of Canada winds down its battle against high inflation.
Though there may be some concerns that inflation may have the means to bounce back if the Bank of Canada cuts by too much in too quick a duration, I’d argue that the biggest risk for passive-income investors is being underinvested in the higher-yielding securities that may be in for a big rally. And, as you’re probably aware by now, yields tend to fall as share prices go on the ascent.
So, if the yields north of 6% look appealing, I would look to start building into a position because, by this time next year, I’d argue that the odds that rates and yields will be quite a bit lower. Meanwhile, the price of admission to such securities may be higher without all too much change to the fundamental story.
In any case, here are three intriguing high-yield heavyweights for investors seeking yields over 6%. While I do view the payouts as more than safe, new investors should always put in their own analysis to ensure they won’t run into dividend reductions at any point over the next three years. Remember, just because a dividend is safe in the near to medium term doesn’t mean it will be over the long haul, especially if the firm under question can’t improve its financial situation over time.
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Laurentian Bank of Canada
Laurentian Bank of Canada (TSX: LB) stock is a $1.16 billion regional bank that’s been absolutely battered in recent years. Indeed, things have gone from bad to worse for the bank after it fell off a cliff in the back half of 2023. Now down around 57% from all-time highs, deep-value investors may wish to nibble on shares now that they’re hovering close to multi-year lows of $26 and change per share.
At these depths, the yield stands tall at 7.1%. For now, Laurentian Bank is a turnaround play that doesn’t have a heck of a lot to show for its efforts.
Even with the new chief executive officer (CEO) in place, Laurentian is the riskiest dividend heavyweight on this list, with a dividend payout that I believe could become vulnerable should the bank not turn the tide within the next two years. Either way, the stock’s cheap and worth looking into if you’re looking for a deep value, a huge yield, and a potentially sizeable upside in a successful turnaround scenario.
BCE
BCE (TSX: BCE) is arguably the most popular dividend stock that yields over 8%. At writing, shares yield 8.7%, and if another few big down days are in the books before the year’s end, I wouldn’t be surprised to see the yield soar past 9%.
Undoubtedly, the dividend payout may not survive another three years unless BCE can show signs of a turnaround. The company has been selling non-core assets, trimming costs in its media division, and embracing other efforts to shore up cash to repay debt and finance that hefty dividend.
While a permanent dividend cut seems unlikely over the medium term, some analysts view a “dividend freeze” as a potential course of action. In such a scenario, BCE stock could fall further as impatient income investors throw in the towel. Personally, I think a dividend pause is plausible. So, if you prioritize income over value, perhaps another high-yield heavyweight would be a better bet.
