With interest rates moving lower over the last two years, investors are looking towards high-yield dividend stocks to create a low-cost passive income stream. While companies that offer a high dividend payout might seem attractive at first glance, it’s crucial to analyze whether these payouts are safe and sustainable across business cycles.
In this article, I have identified one such TSX stock that offers you a dividend yield of over 8%.
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Is this TSX dividend stock a good buy?
KP Tissue (TSX: KPT) is a Canadian tissue paper manufacturer that produces, distributes, and sells disposable tissue products in Canada and the United States. Operating through Consumer and Away-From-Home (Kruger Pro) segments, it offers bathroom tissues, facial tissues, paper towels, and napkins under various brands including Cashmere, Scotties, SpongeTowels, and private labels.
In Q1 2025, KP Tissue grew its revenue by 14% year over year while adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) rose by 13% to $76 million, showcasing the tissue manufacturer’s resilience amid volatile economic conditions and trade disruptions. KP’s consumer segment, featuring brands like Cashmere and Scotties, drove growth with revenue increasing 15.1% to $465.2 million.
Higher sales volumes in both Canada and the U.S., along with improved pricing and favourable foreign exchange impacts, powered the double-digit increase. Canadian revenue grew 7.6% while U.S. sales surged 21.7% year-over-year.
The Away-From-Home segment, recently rebranded as Kruger PRO, posted 7.7% revenue growth to $80.9 million despite profitability pressures from external paper purchases. CEO Dino Bianco noted that customer discussions in this segment have focused heavily on tariff impacts and supply chain concerns, creating market noise that has distracted from traditional growth planning.
Growing in Canada
KP Tissue’s Sherbrooke expansion project continues to exceed expectations, with the new LDC paper machine and facial tissue converting line surpassing start-up projections.
Beginning in the second quarter, the facility is expected to meet essentially all in-house paper requirements, reducing reliance on external purchases and improving Away-From-Home margins.
The company has strategically positioned itself to benefit from growing “Made in Canada” consumer sentiment. All Canadian-sold brands are domestically manufactured, a positioning that has become valuable amid current trade tensions.
Despite tariff concerns, KP Tissue estimated only $3 million in trade-related impacts during the first quarter, including direct tariff charges and supply chain disruptions. It pre-shipped some volume to the U.S. ahead of tariff implementations, contributing to strong American sales growth.
Is this dividend yield safe for the TSX stock?
KP Tissue strengthened its balance sheet with cash reaching $141.8 million and net debt-to-EBITDA improving to 4 times from 4.2 times in the previous quarter. For the second quarter, management provided adjusted EBITDA guidance of $70—75 million, reflecting continued operational strength despite economic volatility.
Analysts tracking the TSX stock estimate its free cash flow to improve from $26.7 million in 2024 to $113 million in 2026. Over the last decade, KP Tissue has maintained its annual dividend at $0.72 per share, which translates to a yield of over 8%.
Given its outstanding share count, KP Tissue’s annual dividend payout is less than $8 million. So, the company’s payout ratio is forecast to improve from 40% in 2024 to less than 10% in 2026.
A widening free cash flow base should allow the TSX dividend stock to lower balance sheet debt and even consider a dividend hike.
