Dividend stocks have always been some of the best long-term investments Canadians can buy.
They are usually more established companies, they tend to be safer, and they can generate steady returns even when the market is going through volatility.
On top of that, dividend income can be incredibly useful if you need the cash for spending, or if you want extra buying power when stocks are cheap. Nothing beats getting paid while the market is down and opportunities are everywhere.
Of course, not all dividend stocks are created the same. There is a big difference between dividend stocks that simply offer a high yield and companies that grow their payouts over time.
Dividend growth can be one of the most powerful long-term wealth builders, but plenty of investors still prefer higher yields today, especially if they want income right away. Most investors, though, will want a combination of both.
The problem is that while high-yield dividend stocks are certainly appealing, they can sometimes be a red flag. A yield that looks too good to be true often signals a company that is struggling or a payout that may not be sustainable.
That’s why it’s essential for investors to focus on high-yield stocks that generate enough cash to actually support their dividends, not just ones that look attractive on the surface.
So, while there are plenty of stocks in Canada offering elevated yields right now, here are two of the highest-yielding dividend stocks that investors can buy and hold comfortably for the long haul.
Source: Getty Images
A top high-yield pipeline stock offering a dividend of 7.3%.
If you’re looking for a high-yield dividend stock that can generate sustainable passive income for you for years to come, one of the best stocks to buy now is South Bow (TSX: SOBO).
South Bow is an $8 billion energy infrastructure stock that generates stable, consistent cash flow thanks to the essential services it provides, transporting 1.25 million barrels of oil per day across its 4,900-kilometre footprint.
Furthermore, what makes South Bow’s cash flow so stable is that roughly 90% of its earnings before interest, taxes, depreciation and amortization (EBITDA) is contracted. In addition, roughly 95% of its revenue exposure is to investment-grade counterparties.
And going forward, South Bow remains committed to providing the most sustainable income possible. In the near term, its main priorities are to expand its core operations and reduce leverage, both of which make the stock more reliable for long-term investors.
Furthermore, South Bow plans to repurchase shares and increase the dividend after it continues to reduce the payout ratio.
And right now, even with a whopping 7.3% dividend yield, South Bow’s payout ratio of distributable cash flow is estimated to be just 66% in 2026, according to South Bow’s guidance.
So, if you’re looking for high-yield dividend stocks that can meaningfully boost the yield of your portfolio, South Bow is certainly one of the best to consider.
A top Canadian royalty stock
In addition to South Bow, another high-yield dividend stock that you can buy and hold with confidence is Freehold Royalty (TSX: FRU).
Freehold has a simple, asset-light business model that makes it ideal for dividend investors. The company simply owns the land that other energy stocks use to produce oil and gas, in exchange for a royalty.
That means Freehold is constantly generating significant cash flow, which it can return to investors or save up to invest in acquiring more land.
In addition to its simple business model, though, what really makes Freehold a reliable high-yield dividend stock is its ultra-conservative payout ratio.
The company aims to payout just 60% of its funds from operations, giving it a significant margin of error in case of a significant drop in energy prices. In fact, the company stated in its third-quarter earnings report that it believes the dividend would remain sustainable at energy prices materially lower than current commodity price levels.
Therefore, considering it offers a reliable 7.2% yield and growth potential over the long haul as it makes more acquisitions, there’s no doubt it’s one of the best high-yield dividend stocks in Canada.
