Identifying which ultra-high-yield stocks are a buy hand over fist requires strong fundamental research and long-term investment. I have identified a few such value buys.
Fiera Capital’s 14% yield
Fiera Capital (TSX:FSZ) is an asset management company that has invested in public equity, private companies, debt securities, and real estate. The company earns from base management fees and performance fees, which fluctuate as per the performance of the overall equity markets. Hence, Fiera Capital’s stock price fell 39% since mid-November as the Canadian and United States equity markets corrected on Trump tariffs.
Since the pandemic, the company has sustained its dividends despite fluctuations in free cash flow. Its dividend payout ratio did not exceed 100% even when it reported a loss per share in the fourth quarter due to high selling, general, and administrative expenses. The high expenses came as the company shifted from a global distribution model to a new regionalized distribution model, which required the opening of new branches and the appointment of regional chief executive officers (CEOs).
This expense is behind it, and the company expects this model to bring in higher investment inflow and increase base management fees. Its strong fundamentals could revive earnings as equity markets recover, hinting that the company can sustain its dividend per share. The share price dip has created an opportunity to lock in a 14% yield and benefit from a recovery rally.
The company has been paying dividends for the past 15 years without any dividend cuts.
Telus’s 7.9% yield
Telus (TSX:T) stock has dipped 40% from its all-time high of April 2022 due to sector-wide challenges. It is among the few telecom stocks that saw an increase in revenue as it added new customers by offering bundled services through competitors’ networks. While Telus’s net profit is stressed due to high-interest expenses from increased balance sheet debt, the dividend-payout ratio is improving as the company restructures its business.
Telus is focused on deleveraging its balance sheet by selling non-core assets. Moreover, it has reduced its capital expenditure on fibre networks and is now investing in monetizing the network through technology solutions. All these efforts and falling interest rates could improve profits and help it sustain and grow its dividends.
Telus has been paying regular dividends for the past 24 years and has been growing them in the last 21 years. In the last 10 years, dividend growth has averaged at an annual rate of 7%.
The management announces a dividend growth target every three years, with the next growth target set for 2026-2029. I expect the management to sustain the 7% growth rate if it reduces its net debt-to-earnings before interest, taxes, depreciation, and amortization (EBITDA) ratio from 3.9 in 2024 to the target range of 2.2-2.7.
It is a stock to buy the dip and lock in the ultra-high 7.9% yield.
The dividend stock to avoid
Algonquin Power & Utilities (TSX:AQN) stock has been on a free fall since August 2022, as the company could not sustain its high debt and rising interest expenses. The company sold its renewable energy and Atlantica business and used the proceeds to repay debt. However, it still has US$8 billion in long-term debt.
Algonquin has slashed its dividend twice in two years. It first slashed dividends by 40% in early 2023. At that time, its CEO resigned, and Chris Huskilson became the interim CEO. The next 40% dividend cut came in October 2024. The company has a new management, with Rod West taking the CEO role and Darren Myers resigning as the chief financial officer.
Constant management changes, falling dividends, downsizing, high debt, and losses show fundamentals are weak. The company is having difficulty sustaining its dividends. Hence, the stock should be avoided despite the 60% dip since August 2022.
