3 TSX stocks with high dividend yields
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When stock prices are low, dividend yields are high
The time has come to buy the TFSA
Reinvest your dividend or take it in cash
Invest regularly to have wealth to splash.
I hope you enjoyed my attempt at rhyming. Let’s talk about investments. The stock market fell yesterday ahead of the US Federal Reserve’s interest rate hike. You’re here CEO Elon Musk has warned of the risk of deflation if rates rise significantly. As always there was for and versus tweets about Musk’s warning. But there is no denying that rising interest rates have a negative impact on the economy and the stock market.
What to do in a volatile market?
One good thing about a volatile market is dividend stocks. When stock prices fall due to market weakness, dividend yields rise. The yield is the dividend per share as a percentage of the share price. Market movements have no impact on the amount of the Aristocrats’ dividend. Therefore, the yield increases because you can get the same X dollars per share in annual dividend at a reduced price.
Three stocks with high dividend yields
The Canadian stock market has many high-quality dividend-paying stocks in the energy and real estate sectors. These stocks all pay a good dividend yield of 5% or more.
Canadian telecommunications giant BCE has a history of paying out dividends from subscription money. The company is in the final year of its three-year capital acceleration program to build fiber and 5G infrastructure. It aims to increase its subscription base by connecting the most remote areas. The deployment of fifth-generation wireless technology will pave the way for the proliferation of the Internet of Things (IoT). Users look forward to broadband-like speed and latency on their mobile devices. With strong demand for higher speeds, more devices will be connected to 5G, bringing more subscription money to BCE.
BCE has been increasing its dividend at an average annual rate of 5% for the past 12 years, and 5G could help it increase that rate even further. If you opt for a dividend reinvestment plan (DRIP), this amount of dividends will allow you to buy more shares and help you build up a significant amount in 20 years. If the stock maintains 5% dividend growth and a relatively stable price, an investment of $5,000 today in a tax-free savings account (TFSA) could become $25,000 in 20 years. A 5% dividend yield could boost your current dividend income from $250 to $1,250 by 2042.
Enbridge is another dividend aristocrat with a 27-year history of dividend growth. This pipeline infrastructure company pays dividends on the tolls it collects for transporting oil and gas through its pipelines. Enbridge is increasing its exposure to liquefied natural gas (LNG) as demand for LNG exports increases.
Since Europe imposed sanctions on its main gas supplier, Russia, it buys all the natural gas available on the market. The United States became the largest LNG exporter in the first half of this year, exporting mainly to Europe. These geopolitical events create lasting change in the energy supply chain. Europe signs long-term LNG supply contracts, making LNG transport an attractive investment.
Natural gas from Enbridge’s upcoming LNG projects already has market demand, which could boost its future cash flow. The company suspended its DRIP in 2018 until further notice. But it continues to pay an annual dividend yield of more than 6%. A $3,000 investment in Enbridge could yield $180 in annual dividend income. I expect dividend growth of 5-7% in December as its business has recovered from the weakness of the pandemic.
With three-year revenue growth of 8.6%, TransAlta Renewables is a mid-cap company growing in revenue faster than the two large caps above, and offering a dividend yield of more than 5 %. TransAlta has been paying regular monthly dividends since September 2013, with a few bumps along the way.
The company develops wind, hydroelectric, natural gas and solar power plants and has a healthy portfolio of projects. In 2022, he expects the dividend payout ratio to be between 88% and 102%. Management plans to reduce this ratio to 80%-85% by increasing its cash flow from new projects. I don’t expect dividend growth by then.
The United States and Europe have enacted energy laws encouraging accelerated investment in wind energy, which could benefit TransAlta in the long term.
If you already own the above three stocks, continue to own them. And if you don’t own them, they’re a good investment to enhance your passive income portfolio.