Investing in reliable Canadian dividend stocks with attractive yields is an effective way to build a steady stream of passive income. These stocks offer regular cash flow and reduce the time required to recoup your initial investment. Moreover, by reinvesting those dividends, investors can compound their returns over time by accumulating more shares, thereby boosting their income and total returns.
Notably, the TSX has several fundamentally strong companies offering reliable dividend payments and high yields. Against this backdrop, here is a top Canadian stock offering an 8.1% dividend yield that I’m buying and holding for decades.
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The 8.1% yield dividend stock
While several Canadian companies pay reliable dividends, Telus (TSX:T) is a compelling investment due to its high yield and resilient payouts. It has been paying and increasing its dividend for years. The communication giant introduced its multi-year dividend growth program in 2011 and has since then repeatedly increased its distributions multiple times.
Notably, since 2004, Telus has returned over $28 billion to investors, including more than $23 billion through dividends and an additional $5.2 billion via share buybacks.
Telus recently extended its dividend growth program for a fifth time, outlining a target of 3% to 8% annual dividend growth through 2028. T stock offers a quarterly dividend of $0.416 per share, which translates to a high yield of 8.1%, one of the highest among Canadian blue-chip stocks.
Telus to pay and increase its dividend
Telus is well-positioned to keep paying and increasing its dividend in the coming year. Naturally, Telus’s high yield sparks concerns about sustainability. However, Telus appears well-positioned to maintain its payouts. The company has been focused on reducing its leverage, moderating capital expenditures, and driving profitable growth. These factors will support its ability to continue rewarding shareholders.
The telecom company maintains a sustainable payout ratio, typically between 60% and 75% of free cash flow, which leaves enough flexibility to reinvest in the business while rewarding shareholders. This covers its payouts and provides capital to focus on growth opportunities.
The company’s diverse and expanding portfolio of services augurs well for future growth. While heightened competition is impacting Telus’s margins, its bundled services are resonating well with consumers and are driving subscriber growth and improving customer retention. Moreover, the expansion of TELUS PureFibre connectivity across Canadian households and businesses is supporting its growth. Telus has consistently maintained a low postpaid churn rate of below 1%, reflecting its ability to offer superior networks and services.
Telus has been transforming itself into a diversified digital services company. TELUS Health has emerged as a key driver of growth and profitability, driven by expanding sales channels, product enhancements, and effective cost management. Further, the company’s AI-driven smart home energy management and affordable security and entertainment services are further strengthening its market position and creating new revenue streams.
In addition, Telus’s focus on reducing debt, shedding non-core assets, and improving operational efficiency positions it well to deliver steady earnings to support its payouts. Moreover, with much of its heavy network investment now behind it, management projects capital expenditures to taper off, setting the stage for a meaningful rise in free cash flow, which will support its payouts.
