Investors seeking reliable income often turn to ultra-high-yield stocks offering dividend yields significantly above the market average. While high-yield stocks can provide steady income and long-term capital appreciation, it is essential to differentiate between those with sustainable payouts and those facing financial or operational challenges. Here, we highlight two ultra-high-yield Canadian stocks that are attractive buys and one that investors should avoid.
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BCE Inc.
BCE Inc. (TSX: BCE), commonly known as Bell Canada, is one of Canada’s largest telecommunications companies, offering internet, mobile, television, and media services. With a strong market position and a long history of dividend payments, BCE remains an attractive option for income-focused investors.
BCE currently offers a dividend yield above 12%, making it a solid choice for income-seeking investors. As a telecom giant, BCE benefits from consistent revenue generated from its broad customer base in essential services like internet and mobile connectivity.
With the rollout of 5G networks and continuous expansion in fibre internet infrastructure, BCE is well-positioned for future growth. To maintain profitability and sustain its dividend payouts, the company has implemented aggressive cost-cutting initiatives, including workforce reductions.
Despite its strong fundamentals, BCE faces challenges, including rising capital expenditures and increased competition in the telecom sector. However, its ability to generate strong cash flows offsets these concerns, making it a compelling buy for income investors.
SmartCentres REIT
SmartCentres REIT (TSX: SRU.UN) is one of Canada’s largest real estate investment trusts (REITs). It specializes in retail and mixed-use properties. With a portfolio that includes Walmart-anchored shopping centres and major urban developments, SmartCentres REIT provides investors with a stable income stream.
SmartCentres REIT offers a high dividend yield exceeding 7%, making it one of the best income-generating stocks in Canada. In addition, a significant portion of its properties is anchored by essential retailers like Walmart, ensuring reliable rental income.
SmartCentres is expanding beyond retail into residential and office spaces, which enhances long-term growth potential. Despite market fluctuations, the REIT has maintained high occupancy levels, showcasing the demand for its properties.
While retail REITs are susceptible to economic downturns and e-commerce disruption, SmartCentres’ strategic expansion into mixed-use properties provides a diversified revenue stream, making it a strong pick for dividend-focused investors.
Telus
TELUS Corporation (TSX: T) is another major telecommunications player in Canada, offering services in mobile, internet, and digital healthcare. While TELUS has historically been a solid investment, recent challenges raise concerns about its dividend sustainability and financial health.
Telus has been aggressively investing in infrastructure and acquisitions, leading to a significant increase in debt. While Telus has a high dividend yield of approximately 7%, there are growing fears that its cash flow may not be sufficient to support continued payouts at current levels.
The company’s recent earnings reports have shown declining profit margins and slower revenue growth. With intense competition in the telecom sector and ongoing pricing pressures, Telus may struggle to maintain profitability in the long run.
While Telus remains a well-known brand in Canada, its increasing debt burden, slowing revenue growth, and potential dividend risks make it less attractive than BCE. Investors looking for telecom exposure would be better off with BCE, which has stronger financial stability and growth prospects.
