Investing in high-yield dividend stocks can be a strategic move for income-focused investors, especially when considering companies like Yellow Pages (TSX:Y), Parex Resources (TSX:PXT), and BCE (TSX:BCE) on the TSX. Let’s delve into why these stocks present compelling opportunities this November.
Yellow Pages
First, Yellow Pages, traditionally known for its print directories, has been undergoing a significant digital transformation. Despite a decline in total revenues by 11% year over year, the dividend stock reported a favourable bending of the revenue curve for the second consecutive quarter, indicating improved revenue trends.
Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for the quarter was 26.5% of revenue. Thus reflecting solid profitability despite ongoing investments. The dividend stock maintained a healthy cash balance of approximately $34 million at the end of July, demonstrating strong cash generation. A dividend of $0.25 per common share was declared, indicating confidence in financial stability and shareholder returns.
Parex stock
Next, Parex Resources, an independent oil and gas company operating in Colombia, has demonstrated robust financial health. In the quarter ending June 30, 2024, the dividend stock reported revenue of US$305.86 million, marking 11.62% in growth. This brings the company’s revenue in the last 12 months to $1.21 billion, up 2.83% year over year.
In the year 2023, Parex Resources had an annual revenue of $1.17 billion, down 10.75%. The dividend stock also offers an attractive dividend yield of approximately 11.53%. It also holds a payout ratio of 36.75%, indicating a sustainable dividend policy.
BCE
Finally, BCE stock, a leading Canadian telecommunications company, continues to be a reliable dividend payer. Despite a 42% decline in profit in the first quarter due to higher costs, largely related to recent layoffs, the dividend stock maintained its dividend payments.
BCE reported a net income of $457 million, or $0.44 a share, down from $788 million. The dividend stock’s forward annual dividend rate is $3.99, yielding approximately 9.86% at the time of writing. So, the dividend stock continues to be a strong option. However, higher costs and lower net income could raise red flags.
Value among dividends
The current market valuations of these companies present attractive entry points for investors. Yellow Pages has a trailing price-to-earnings (P/E) ratio of 4.10, indicating it is trading at a low multiple relative to its earnings. Parex Resources has a trailing P/E ratio of 3.08, suggesting it is undervalued compared to its earnings. Meanwhile, BCE has a trailing P/E ratio of 18.82, which is reasonable for a stable, dividend-paying company in the telecommunications sector.
High dividend yields are a significant attraction for income-focused investors. Yellow Pages offers a dividend yield of 10.10%, Parex Resources provides a yield of 11.53%, and BCE yields approximately 9.86%. These yields are substantially higher than the average dividend yield of the TSX, thus providing investors with enhanced income potential.
A company’s dividend payout ratio indicates the proportion of earnings paid out as dividends. Yellow Pages has a payout ratio of 40.98%, Parex Resources stands at 36.75%, and BCE has a higher payout ratio of 182.79%. While BCE’s payout ratio is elevated, it reflects the company’s commitment to returning capital to shareholders. This is further supported by its stable cash flows.
Bottom line
Looking ahead, these companies have positive outlooks. Yellow Pages’s digital transformation efforts are expected to stabilize revenues. Parex Resources’s strong financial position and operational efficiency position it well to capitalize on favourable oil market conditions. BCE’s strategic investments in 5G technology and fibre optic networks are anticipated to drive future growth.
Yellow Pages, Parex Resources, and BCE offer compelling opportunities for income-focused investors. The dividend stock’s high dividend yields, sustainable payout ratios, attractive valuations, and positive future outlooks make them worthy considerations, especially for your investment portfolio this November.
