10 Canadian Dividend Stocks With Yields Above 8%

These dividend stocks are yielding 8% to 16% today, but not all stocks are safe…

Increasing yield

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Canadian income investors are spoiled for choice today, what with several dividend stocks offering thrice as much or even more in yields as compared to income benchmarks such as the U.S. 10-year Treasury note and the Canadian 10-year bond.

A high dividend yield, however, can spell danger if it is the result of lower dividends or falling stock prices because of weak fundamentals of the underlying company. With that in mind, check out the names of some of the highest yielding dividend stocks in Canada today and whether they’re worth your money or better off left on the sidelines.

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As Canada’s leading space technology company, Maxar Technologies makes for an interesting company but the stock has left investors in the lurch, losing a whopping 47% value year to date and driving Maxar’s dividend yield over 16%.

The biggest blow came in January when Maxar announced that its WorldView-4 digital imaging satellite, which generated revenue worth US$85 million in fiscal 2018, has failed. Soon after, Maxar’s CEO Howard Lance resigned.

To be sure, Maxar is spending heavily on satellite replacements and expects capital expenditures to decline after 2021, which should free up more cash to pare debt and pay dividends. Maxar is free-cash flow positive and has paid a dividend every year since 2011, increasing it twice in between. But with high capex likely to eat into its cash flows in coming quarters, the road ahead is a tough one for Maxar.

Chemtrade Logistics is an industrial chemicals manufacturer and services provider. With the stock tanking nearly 40% in six months, Chemtrade’s dividend yield has shot up to 13%.

Chemtrade had a challenging 2018 as impairment charges ate into its bottom line, resulting in a net loss of nearly $132 million on revenue worth $1.6 billion. Management is confident 2019 will be a better year and ruled out any possibility of a dividend cut during a recent conference call.

Chemtrade pays a monthly dividend and has paid a dividend every year since 2001. Don’t expect dividend growth from Chemtrade though: The company has paid a fixed monthly dividend of $0.10 per share since 2007 and will likely continue doing so. The monthly payment and stability in dividend makes it an appealing high-yield stock, albeit with the risks associated with a commodity-based business.

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CanWel Building is a distributor of building materials and home renovation products and services. The stock has lost significant value in the past year or so, partly because of rising interest rates that means a higher interest outgo on debt for the company and partly a slump in the prices of lumber and plywood.

Yet, CanWel is on track to deliver strong numbers for fiscal year 2018, having earned 28% higher net profit on 19.5% higher revenue during the nine months ended Sept. 30, 2018. Credit goes to CanWel’s recent focus on diversification, partly through acquisitions, that has added a stronger mix of higher-margin, value-add products to its portfolio.

CanWel has paid a steady dividend of $0.14 per share every quarter since 2012, and if there’s anything that could derail the trend, it’s a slowdown in the Canadian and U.S. housing markets. For now, CanWel’s dividend looks safe though.

Just Energy is an electric and natural gas utility serving nearly 1.6 million customers across North America. Lately, the company has increased focus on non-utility products such as ecobee smart thermostats and water filters, offering them through tie ups with brick and mortar retailers such as Walmart‘s Sam’s Club to boost margins.

After slashing its dividends in 2013, Just Energy reverted to a steady payout of $0.125 per share in dividend every quarter since Q3 2014. In the long run, Just Energy aims to grow its customer base at a compound annual rate of 10% and save $20 million in costs every year under its ongoing cost reduction program. Just Energy also aims to maintain a dividend payout ratio below 75%.

With a strong order book and cash flows to boot, Just Energy looks like a good dividend stock for the long haul.

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Amazon CEO Jeff Bezos recently warned investors that “Amazon will be disrupted one day” and eventually “will go bankrupt.”

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Oil and natural gas company Frontera Energy’s stock has slid rapidly after it was split mid-last year, driving the stock’s yield above 10%. Other than its struggle to shrug off the pessimism associated with its bankruptcy filing when it operated as Pacific Exploration & Production Corp. in 2016, Frontera has also taken a hit of millions of dollars since November 2018 after a rupture in a key state-owned pipeline in Peru disrupted production.

Frontera expects flat production for 2019 but believes its recent restructuring and expansion efforts should boost production beginning 2020. That said, Frontera isn’t a great choice yet for dividend investors for one simple reason: It has just started paying a dividend and plans to link payable amount to crude price. So it’ll pay a quarterly dividend of US$12.5 million if Brent oil prices average US$60/bbl or above. That adds a factor of uncertainty to this high-yield stock.

Dorel manufactures products like children’s apparel, home furnishings, and bicycles under well-known brands including Maxi-Cosi, Safety 1st, Cannondale, and Dorel Living. In FY 2017, the consumer products company generated $2.6 billion in revenue from sale across 100 countries.

The ongoing tariff war between the U.S. and China and the fall of a customer, Toys R Us, has hit Dorel hard in recent quarters and it’ll likely end fiscal 2018 with a significant drop in profit. That also explains the stock’s sharp 40%-plus fall in the past one year which has pushed its dividend yield up to 9.7%.

However, Dorel is generating positive free cash flows and should be able to pay out a steady dividend of $0.30 per share every quarter like it has since 2013. A truce between the U.S. and China could be the biggest positive trigger for Dorel stock in the near future.

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Oilfield services provider Ensign Energy just took a big growth leap with the acquisition of Trinidad Drilling. While Ensign took a revolving credit worth $1.25 billion to fund the acquisition, Trinidad’s addition has doubled Ensign’s rig count to 302 and nearly tripled its exposure to key U.S. shale basins such as the Permian and Eagle Ford. Ensign’s drilling days in the U.S. increased 19% in the fourth quarter thanks to Trinidad.

On the flip side, higher debt means Ensign will prioritize using the cash flows it generates going forward to pare down debt and not increase dividends. Ensign Energy, however, expects to maintain its current annual dividend payout of $0.48 per share. If Trinidad turns out to be value accretive, Ensign should make for an interesting stock to watch in the energy space.

While falling stock prices is often the reason behind most high yields, Vermilion Energy is an exception. After a sharp drop in the last quarter of 2018, Vermilion Energy stock has risen nearly 15% so far this year yet offers a hefty dividend yield above 8%.

Vermilion Energy’s growth prospects seem to have caught investor attention. The oil exploration company is targeting 18% production growth and nearly $1 billion in cash from operations in 2019. Its free cash flow (FCF) per share could jump as much as 25%, making it one of the best years for the company.

Rising FCF is great news for dividend lovers as it could mean higher dividends. Vermilion has paid a dividend every month since 2003 and increased its dividend in 2018. With its high yield backed by strong cash flows, Vermilion Energy is an attractive dividend play in the energy space.

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Alaris Royalty increased its annual dividend by around 2% late-last year. Now that’s a marginal increase but importantly, it comes after a three-year hiatus: Alaris last increased its dividend in 2015.

Clearly, management is more confident about the company’s future and believes it can maintain a higher payout. Much of it has to do with Alaris’ recent partnership with GWM Holdings, a U.S.-based digital marketing and advertising solutions provider. The deal will fetch Alaris US$5.6 million in annual cash distribution. Alaris invests in non-control, preferred equity of private businesses and earns hefty monthly cash distributions in return.

Alaris Royalty’s long-term goal, in fact, is to create an “optimal dividend stream” for investors, which means shareholders can not only expect steady dividends but also dividend growth from the stock in the long run. That should support strong yields and fetch income investors good returns.

Inter Pipeline operates crude oil pipelines, bulk liquid storage terminals, and processes natural gas. The company’s revenue first hit $1 billion in 2006. In fiscal 2018, it generated record revenue worth $2.6 billion.

2018 was, infact, a great year for Inter Pipeline as it earned record net income and record annual funds from operations worth $1.1 billion. Not surprisingly, the company’s dividend payout was also is highest ever at as it announced a 10% increase in dividends, marking the 10th straight year of dividend hike.

With nearly 70% of Inter Pipeline’s EBITDA (earnings before interest, tax, depreciation, and amortization) coming from fee-based and cost-of-service contracts, the company can generate stable cash flows and pay steady dividends. Inter Pipeline’s strong cash-flow trend, growth projects, and management’s commitment to dividend growth makes it one a top energy dividend stock to own.

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High-yield dividend stocks are a great investing tool to supplement your income provided you choose your stocks carefully after analyzing whether the dividend and yield is sustainable or not.  As you may already know, falling stock prices drive yields higher. The key to your dividend investing success lies in finding fundamentally strong companies that have been punished by the market for near-term headwinds. Such stocks stand a greater chance to rebound even as you enjoy a high yield while awaiting a recovery.

Fool contributor Neha Chamaria has no position in any of the stocks mentioned.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.