It’s still a really good time to be a passive-income investor, with yields on dividend stocks and REITs (real estate investment trusts) still at fairly bountiful levels. Add the rise of various covered call exchange-traded funds into the equation, and there’s no shortage of selections for Canadians who would rather live off investment income than draw down capital. In this piece, we’ll check out four dividend knights in shining armour that I believe are more than worthy of the honour of a spot in a long-term portfolio.
As always, chasing higher yields can be a risky move if you don’t put in the analysis and due diligence well beforehand. A sky-high yield isn’t all too great if it’s on unstable footing (think a lacklustre balance sheet or a lack of growth during tough years). Indeed, it’s far better to have a moderate yield that’s well-covered than an ultra-high-yield that’s at high risk of a dividend reduction.
Without further ado, here are two solid dividend stocks that, in my view, ought to be knighted!
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Telus
Telus (TSX:T) has been through a difficult past three years, but it’s weathered the storm a bit better than some of its peers in the telecom scene. Today, I view Telus as one of the better low-cost dividend plays out there. The yield sits at 7.6% at the time of writing. It’s a towering yield that actually looks likelier to grow than be reduced.
As the Bank of Canada looks to lower rates further while the firm continues to improve operational efficiencies and invest in its network, I do think Telus could have the pieces needed for its stock to stage some sort of bottom at some point over the next two years. Of course, timing a bottom will always be difficult to do. The good news is you don’t need to catch the bottom to score a wonderful dividend that will only get more enticing should shares inch lower from here.
Will Telus’s dividend be sent to the chopping block if shares can’t reverse course in 2025? Personally, I don’t think so, especially if rate cuts arrive and subscriber growth looks upward.
Suncor Energy
Suncor Energy (TSX:SU) is a cheaper way to play the Canadian energy patch. The stock goes for just 10.3 times trailing price to earnings (P/E) with a 4.6% dividend yield. Of course, Suncor has tended to trade at a discount relative to some of its peers in the energy patch. That said, I do think some multiple expansion could be in order as the company enhances its overall operations.
In the first quarter, Suncor posted higher first-quarter production and refining throughput. Indeed, Suncor seems to be firing on all cylinders. And while the stock hasn’t done much in three years, I still think new income investors have ample reason to stick with the name. With solid dividend-growth prospects and a very modest price of admission, I’d not be surprised if Suncor has what it takes to outdo its peers in the coming years as oil headwinds linger for a bit longer.
