Investing in the right high-yield dividend stocks today can grow into a substantial income stream tomorrow. The key is finding the right stocks and weighing what you give up by prioritizing income.
A high yield can be attractive, especially for those investors looking to build a passive income stream. That being said, there’s more to picking the right stock for a portfolio than the yield. There are also growth and debt considerations, as well as the broader state of the economy.
Fortunately, there’s plenty of great high-yield dividend stocks to choose from. There are three in particular that offer the income levels that investors want, as well as impressive defensive moats that come from operating in mature markets for decades.
Let’s look at those three high-yield dividend stocks to consider for your portfolio.
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Enbridge offers income backed by essential infrastructure
The first stock to consider is Enbridge (TSX: ENB). Enbridge is one of the largest energy infrastructure companies on the planet. Enbridge operates natural gas and oil pipelines across North America as well as renewable energy assets and a natural gas utility.
The pipeline segments generate the bulk of the company’s revenue and are tied to long-term contracts. In other words, Enbridge earns a recurring and stable revenue stream by transporting crude and natural gas regardless of how the market is moving.
And the sheer volume that Enbridge transports across that network makes the company one of the most defensive picks on the market. Specifically, Enbridge hauls nearly one-third of all North American-produced crude and one-fifth of the natural gas consumed by the U.S. market.
That same defensive appeal and necessity extends to Enbridge’s renewable and natural gas utility operations.
Collectively, the segments generate cash that allows Enbridge to invest in growth initiatives from its massive backlog and pay a quarterly dividend. As of the time of writing, the yield on that dividend works out to an impressive 5.9%.
Adding to that appeal, Enbridge has provided investors with annual upticks to that dividend for three decades without fail. Between the defensive business and generous (and still growing) dividend, it’s hard not to consider Enbridge as one of the must-have high-yield dividend stocks for any portfolio.
Don’t forget Canada’s big banks
It’s hard to compile a list of the high-yield dividend stocks without mentioning one of Canada’s big bank stocks. Today, that bank to consider is Bank of Nova Scotia (TSX: BNS).
Scotiabank isn’t the largest of the big banks, but it is the most international. The bank generates revenue from lending, deposits, and wealth management activity from both its domestic and international operations.
The bank’s access to international markets provides Scotiabank with long-term growth potential. In recent years, Scotiabank has shifted its focus away from developing markets in Latin America. Instead, it now focuses on mature markets such as the U.S. and Mexico.
Turning to dividends, Scotiabank has paid dividends for well over a century without fail. As of the time of writing, the bank offers a 3.5% yield.
Between the mature domestic market at home and its growth-focused international segment, Scotiabank offers investors looking for high-yield dividend stocks a hard-to-ignore combination.
Introduce some monthly income
Rounding out the three high-yield dividend stocks is RioCan (TSX: REI.UN). RioCan is one of Canada’s largest REITs and owns a portfolio of shopping centres and mixed-use residential properties.
Many of those retail sites sell essential retail. This means that they offer some defensive appeal while also generating more foot traffic to the sites. That helps to keep occupancy high, which in the most recent quarter hit 98.8%.
The mixed-use residential properties are primarily located along transit corridors in major metro markets. This also provides a source of foot traffic for the retail sites in those properties, leading to higher demand overall.
In terms of income, RioCan offers a monthly distribution that carries a yield of 5.7%. The monthly income that the REIT provides helps to offset the less frequent payouts of the two other stocks.
Final thoughts on your high-yield dividend stocks
No stock is without risk. That’s why the importance of diversifying cannot be stated enough. Fortunately, the trio of options mentioned above offer some defensive appeal and growth in addition to their attractive payouts.
In my opinion, one or all of the above should be core holdings in any well-diversified portfolio.
