Image source: Getty Images.
High-dividend-paying stocks, particularly those offering high yields, have always been solid investments for investors looking for a reliable source of passive income. Moreover, as the Bank of Canada has begun to ease its monetary policy, these stocks look even more attractive due to their higher yields than traditional debt-based investments.
Against this backdrop, let's explore three Canadian stocks with fundamentally sound businesses, high yields and reliable payouts.
Scotiabank
Investors looking for high-yield stocks might consider buying Scotiabank (TSX:BNS) stock. With a long history of dividend payments dating back to 1833, this major Canadian bank has a solid reputation for rewarding its shareholders.
Scotiabank is known for its consistent dividend growth. In addition to its strong dividend payment history, the bank has increased its dividend at an impressive compound annual growth rate (CAGR) of 6% since 2013. This growth is supported by the bank’s broad range of products and services, its presence in fast-growing markets, strong deposit growth, and a solid balance sheet, all of which contribute to higher earnings and dividend payments.
Scotiabank currently offers a quarterly dividend of $1.06 per share, which translates to a high yield of 6.1%. In addition, the bank's efforts to diversify its revenue, improve efficiency, and generate earnings per share (EPS)-enhancing investments and stable credit performance should further support its ability to sustain and grow its payouts over time.
From a valuation perspective, Scotiabank is also a good choice. Its shares are trading at a forward price-to-earnings (P/E) multiple of 10.3 and a price-to-book (P/B) ratio of 1.1. These figures are lower than those of its peers, indicating that the stock may be undervalued, offering investors an excellent opportunity to buy at current levels.
Enbridge
With a high yield of 6.7% and a stellar track record of dividend payments and growth, Enbridge (TSX:ENB) is one of the top TSX stocks for income-seeking investors. This energy company has been paying dividends for over 69 years. In addition, it has consistently increased its dividend at a compound annual growth rate (CAGR) of 10% over the past 29 years.
Enbridge’s ability to maintain and grow its dividend is supported by its growing earnings and distributable cash flow (DCF). The company’s diversified revenues, investments to grow its conventional and clean energy asset base, long-term contractual agreements, and focus on low-risk, low-capital projects bode well for future growth. In addition, accretive acquisitions will support its earnings in the years ahead.
The energy infrastructure company is forecasting mid-single-digit growth in its earnings per share (EPS) and discounted cash flow (DCF) per share over the long term. This will allow Enbridge to steadily grow its dividend at a healthy pace. Its durable payouts and visibility into future earnings per share growth make Enbridge a solid high-yield dividend stock.
Telus
Shares of the telecommunications giant Telus (TSX:T) should be on your radar if you are looking for high, reliable yields. Telus’ ability to consistently grow its earnings through cost efficiency provides a solid foundation for higher dividend payouts.
Since 2004, Telus has returned an impressive $21 billion to its shareholders through dividends. In the second quarter of 2024, the company announced a dividend of $0.39 per share, which is a 7% increase compared to the previous year. What makes Telus particularly attractive is its commitment to increasing dividends semi-annually. Telus aims to increase payouts by 7-10% annually as part of its long-term dividend growth strategy.
The company also maintains a sustainable payout ratio, distributing between 60 and 75% of its free cash flow as dividends.
Telus’ continued investments in its PureFibre network and 5G infrastructure are key drivers supporting its future earnings growth. The company is also focused on high-growth sectors such as digital transformation and cybersecurity, which are expected to drive long-term growth and further strengthen its dividend-paying capacity. Telus currently offers a solid dividend yield of 6.9%, making it an attractive option for income-focused investors.