Investing in dividend stocks offering ultra-high yields can be a smart strategy for generating a solid passive income. However, investors should exercise caution, as high yields may not be sustainable in the long run. Thus, investors could consider adding fundamentally strong stocks with a growing earnings base and sustainable payouts. Such Canadian stocks are more reliable investments for generating worry-free income for years.
Against this background, here are two ultra-high-yield dividend stocks to buy and hold for a decade.
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Ultra-high-yield dividend stock #1
Among the leading Canadian stocks offering ultra-high yields, investors could consider adding Telus (TSX:T) to their portfolios. The Canadian communication giant is known for its attractive dividend growth history, sustainable payout ratio, and solid yield, making it a compelling bet for passive-income investors.
Telus pays a quarterly dividend of $0.402 per share, translating into a high yield of about 8% based on the closing price of $20.18 (as of January 21, 2025). Thanks to its ability to consistently grow its earnings, the telecom company has raised its dividend 27 times since 2011 and returned more than $21 billion in dividends to its shareholders since 2004.
Telus is well-positioned to maintain its dividend growth over the next decade. Its investments in network upgrades and spectrum acquisitions will likely attract new customers and boost connected device subscriptions, driving its future revenues. Further, its focus on profitably growing its subscriber base and lowering the customer churn rate will continue to drive strong cash flows, supporting higher payouts.
Moreover, Telus is poised to benefit from the 5G transition and rising demand for mobile data. Telus has also expanded its operation across digital IT (Information Technology) solutions, artificial intelligence (AI)-driven automation, and Internet of Things (IoT) services, which bodes well for future growth.
Ultra-high-yield dividend stock #2
Investors seeking high yields could rely on SmartCentres REIT (TSX:SRU.UN) to generate regular passive income. SmartCentres offers a monthly dividend of $0.154 per share, translating to an impressive yield of about 7.6% based on its closing price of $24.35 on January 21. Its monthly dividend payments are backed by its ability to generate solid net operating income (NOI) in all market conditions.
This real estate investment trust or REIT has a resilient and diverse portfolio of properties, primarily anchored by grocery-based retail centres. These properties are relatively insulated from economic downturns, enabling the company to maintain high tenant retention and generate stable income, leading to higher cash collection and occupancy rates. Further, the company is witnessing solid demand for its high-quality real estate from new and existing tenants.
Looking ahead, SmartCentres REIT is focusing on mixed-use development projects, which will diversify its income streams into sectors like residential, office, self-storage, and industrial spaces and position it for long-term growth. Further, its real estate portfolio of high-traffic, value-oriented centres will continue to attract new tenants. Moreover, with long-term tenant contracts, increased leasing activity, a substantial land bank, and high retention rates, SmartCentres remains well-equipped to capitalize on growth opportunities and generate solid NOI, which will drive its future dividend payments.
