If dividend investing is your strategy to invest in the stock market, Canada is a gold mine of such stocks. Banks, energy, telecom, and real estate are some of the most lucrative sectors that enjoy regular cash flows and pay regular dividends. You can invest in each of these sectors and diversify your dividend portfolio. The sector allocation is just one part. Within the sector, it is important to select the right players.
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Two high-yield stocks to buy aggressively
Only companies with good efficiency, strong management, stable cash flow, and good debt management generate regular dividends. And such stocks are the ones you can consider buying aggressively. Here are two such high-yield stocks you could buy anytime.
Enbridge
Enbridge (TSX: ENB) just made its highest rally in nine years after the outcome of the U.S. presidential elections and the U.S. Fed interest rate cut sent the oil and gas stocks on a bullish rally. Moreover, Enbridge completed the acquisition of the three U.S. gas utilities in October, making the company more sensitive to U.S. news.
Enbridge’s share stays in the range of $45-$55, but the stock price crossed the $60 mark. Whenever the stock breaches this range, grab the opportunity and buy if the price is below $45 and sell if it is above $55. You can buy the stock later as it cannot sustain these prices.
While I would avoid buying the pipeline stock at such a high price and a lower yield of 6%, you can consider selling any past holdings. You can buy it aggressively when the price falls to $50 or lower after February as winter nears the end. Buying at the dip can help you lock in a higher yield of 7%, and selling the rally can help you book profits.
Telus
While Enbridge is trading at its nine-year high, Telus (TSX: T) stock is trading at its four-year low. The telecom industry is going through consolidation and restructuring. Hence, Telus and BCE entered a price war to tap maximum customers for 5G. This price war and high interest on significant debt stressed their profits.
Now is the time to buy the stock as Telus is restructuring its business and focusing on bringing the debt to its target levels by reducing costs and improving profits. The sharp interest rate cuts will help Telus reduce finance costs. However, it will take some time to reflect on the income statement.
BCE has paused dividend growth, but Telus continued to grow dividend by 3.4% for January 2025. There is a possibility that Telus will announce another hike in mid-June to maintain its semi-annual dividend growth trend. Now is the time to buy aggressively and lock in a 7.5% yield.
A high-yield stocks to steer clear of
While high-yield stocks are attractive, not all are value buys. Algonquin Power & Utilities (TSX: AQN) had a renewable energy business that built and operated renewable energy plants. However, the company sold this business to reduce its piling debt, which is difficult to sustain. The company has slashed dividends by 40% twice in two years, and more could come if profits do not improve.
It is better to stay away from this utility till the income statement shows signs of improvement and the balance sheet shows a reduction in debt to manageable levels.
