Investing in high-yield dividend stocks can help generate significant passive income. But it also comes with risks. In fact, an unusually high yield can be a warning sign that a company is struggling. Often, the yield looks high because the stock price has dropped due to financial trouble. These stocks can be risky, as their dividends may not be sustainable, making them trash investments.
That said, not all high-yield Canadian stocks are risky investments. There are a few fundamentally strong dividend stocks offering high and sustainable yields. These stocks can power up your portfolio and help you earn robust passive income. With interest rates gradually declining, these high-yield dividend payers appear even more appealing.
With this backdrop, here are two high-yield stocks that aren’t trash investments.
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Telus
Canadian communications company Telus (TSX: T) is an attractive high-yield dividend stock that investors could consider buying and holding for decades. Telus has consistently rewarded its shareholders with higher dividend payments for years. Moreover, it offers a high and sustainable yield, making it an attractive investment for passive income.
The leading telecom company has distributed over $23 billion in dividends since 2004. Moreover, it has raised its quarterly payouts 27 times in the last 14 years through a multi-year dividend growth program. Besides its dependable payouts, it currently offers a quarterly dividend of $0.416 per share, translating into a high yield of 7.7%.
The company’s growing dividends reflect its ability to drive earnings in all market conditions. Its diverse revenue streams, a low customer churn rate, a focus on acquiring margin-accretive customers, and cost-reduction initiatives augur well for future earnings growth. Furthermore, its investments in network infrastructure are likely to drive subscriber growth, supporting payouts.
Looking ahead, its focus on expanding fibre-optic coverage and strengthening 5G capabilities will continue to drive subscriber growth and help retain existing subscribers. At the same time, momentum in Telus Health and the expansion of its Internet of Things (IoT) offerings augur well for growth.
First National
Investors seeking high-yield dividend stocks could consider First National (TSX: FN). This financial currently pays a monthly dividend of $0.208 per share. This translates into an attractive yield of 5.2% Further, First National has a proven track record of rewarding shareholders, having increased its dividend 18 times since its IPO. This growth has been driven by the company’s consistent expansion of mortgages under administration (MUA), which drives its earnings.
First National operates as a non-bank mortgage lender, adopting a conservative lending approach. Its business generates steady income through growing MUA, as well as securitization and underwriting services for third-party institutions. Approximately 60–70% of its mortgages are insured, and nearly 96% of its MUA is funded with no residual credit risk. These factors help ensure stable earnings and consistent dividend distributions.
The financial services company anticipates further growth in mortgage originations, which will expand its MUA and, in turn, support higher income and dividend payments. Additionally, higher securitization margins and mortgage renewal opportunities augur well for growth. Overall, First National is a dependable income stock offering a high and reliable yield.
