The Best High Yield Stocks For May 2023

Are you looking for income from high yield stocks?

While the highest yield isn’t always the best investment, it’s a good place to start looking for income.

Based on stock price, which can move up or down depending on company news and performance, the list will change. As such, the opportunities will vary every month and that’s why it’s important to have a systematic approach to understanding which high yield stocks are an opportunity.

An opportunity can be for a stock you already own or simply for a new addition to your portfolio. It is important to note that the rankings below do not assess the viability of the business.

Top 10 Canadian High Yield Dividend Stocks

This month’s results are a snapshot in time at the time of writing and many factors could change the rankings. It’s important to be aware that a high yield stock can either be a good income source or a warning sign for the dividend.

Do look further into their payout strategy and history before committing to a high yield stock to avoid unnecessary risks on your portfolio. If high yield is necessary, look at the Canadian Financial ETFs, they also pay a sustainable high yield.

Be aware that high yield stocks could be as dangerous as investing in Canadian penny stocks.

1. Canoe EIT Income Fund

Founded in 2008, Canoe Financial LP established operations with the acquisition of management of the publicly traded $1.2 billion Canoe EIT Income Fund.  Canoe now manages approximately $4.6 billion in assets across a diversified range of open end mutual funds, and private energy equity products.

Canoe has expanded from its Calgary head office to across Canada, including a significant presence in Toronto and offices in Vancouver, Winnipeg, Ottawa and Montreal.  Since launching its first mutual funds in February 2011, Canoe has grown its mutual fund assets to more than $2.8 billion, making it one of the fastest growing entities in the Canadian mutual fund industry.

One of Canada’s largest closed-end investment funds, designed to maximize monthly distributions and capital appreciation by investing in a broadly diversified portfolio of high quality securities.

Key Investment Data

2. Allied Properties REIT

Allied owns 160 urban properties (132 rental properties, eight development properties, and 11 ancillary parking facilities) spanning across 11 million square feet in Canada. Its portfolio comprises of a balanced mix of new and historical buildings.

The firm focuses on urban intensification and has a presence in Canada’s major cities such as Toronto, Montreal, Calgary, Vancouver, Ottawa, Edmonton, and Kitchener. Allied’s segments can be divided into urban data centers (18% of 2018 NOI), western (12%), eastern (25%) and central (45%).

Office space accounts for a larger portion of its NOI at nearly 69%, followed by urban data centers (18%), retail (8%) and parking (5%). Allied also has a subsidiary, Allied Properties Management LP which provides property management and other fee-based services.

Key Investment Data

3. TransAlta Renewables

TransAlta Renewables is a renewable energy company and one of the largest generators of wind power in Canada. It is a sponsored vehicle of TransAlta Corporation. With more than a century’s experience under its belt, TransAlta Renewables has developed a rich experience of owning, operating, and maintaining a large fleet of power generation assets.

TransAlta Renewables owns and operates 21 wind farms, 13 hydroelectric facilities, seven natural gas plant, one solar facility and one natural gas pipeline in the US, Canada, and Australia. Highly contracted renewable and natural gas power generation assets, and long-term contracts with strong counterparties ensure stable cash flows for the company.

TransAlta Renewables owns renewable energy facilities across different regions and multiple technologies. The company owns directly or through economic interests more than 2,400 MW of net generating capacity and are strategically located to supply growing industrial regions.

Key Investment Data

4. Freehold Royalties

Freehold Royalties is an oil and gas royalty company with assets predominantly in western Canada. The company receives oil and natural gas revenue from approximately 300 industry operators with royalty rates varying from less than 1% to 22.5%.

The royalty volumes are weighted nearly 55% oil and natural gas liquids (NGL) and 45% natural gas. Freehold does not incur any capital costs to drill or equip the wells for production. Its land holdings total more than 6.4 million gross acres, which is one of the largest independently owned royalty lands portfolios in Canada.

Its royalties as a percentage of production have remained above 95%. About 10% of industry drilling within western Canada is on Freehold land. Given its strong reputation, the company can conveniently create new leases on its royalty lands.

Key Investment Data

5. Gibson Energy

Gibson Energy is a leading oil focused infrastructure company in Canada. The company primarily engages in the storage, processing, and gathering of crude oil and refined products. It also provides a full suite of marketing services to producers. 

The company’s operations can be divided into three broad segments - infrastructure (5% of 2018 revenue), logistics (1%), and wholesale (94%). Though the wholesale business is Gibson’s largest segment by revenue, its infrastructure business accounts for nearly 60% of total profits. Gibson Energy operates nearly 14 million barrels of storage and over 500 km of crude pipelines.

Gibson Energy’s operations are focused around its core assets which include Hardisty and Edmonton terminals, the Moose Jaw Facility and a large network of pipelines in the U.S. Strategically located assets and a large marketing network are Gibson’s key competitive advantages.

Key Investment Data

6. SmartCentres REIT

SmartCentres REIT is Canada’s largest developer and operator of unenclosed shopping centers. It engages in the acquisition, asset management, planning, development, leasing, operations, property management and construction of properties.

SmartCentres’ growing platform includes value-oriented unenclosed shopping centers and destination outlets. The REIT currently has 3,100 tenants and 34 million square feet of leasable space available across 150 locations across Canada.

SmartCentres has long enjoyed a reputation for consistent performance, making it one of Canada’s premier real estate investment trusts. Over the years, SmartCentres has developed a strong focus on retail development and operation. Its expertise has grown to include a variety of urban, mixed-use, residential and industrial developments, including a number of master planned communities.

Key Investment Data

7. TC Energy

TC Energy is a leading North American energy infrastructure company. It supplies more than 25% of natural gas consumed daily across North America. The company has a strong portfolio of diversified assets, storage facilities and power generation plants and operates one of North America’s largest natural gas pipelines networks extending to more than 57,500 miles.

TC Energy operates three complementary energy infrastructure businesses across three major geographies in North America. By generation type, TC’s assets can be divided into nuclear, natural gas and wind. The USA, Canada and Mexico are its core geographies and the company has access to North America’s two most prolific natural gas supply basins.

With more than 65 years of service, TC Energy is known for delivering energy in a safe and sustainable manner. Ownership of low-risk regulated cost-of-service businesses and long-term contracted energy infrastructure assets differentiate TC Energy from its peers.

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8. Enbridge

Enbridge Inc. is the largest energy infrastructure company in North America. It is Canada’s largest natural gas distributor engaging in the collection, transportation, processing and storage of oil and gas. Enbridge caters to 3.7 million customers in Ontario, Quebec, New Brunswick, and New York.

Enbridge owns an extensive network of about 192,000 miles of natural gas and NGL pipelines across North America and the Gulf of Mexico. Its crude oil and liquids transportation systems are huge comprising of more than 17,000 miles of active pipelines.

The company is known for its high quality liquids and natural gas infrastructure assets. In addition, Enbridge has 3.1 Bcf/d of processing capacity and 438 Bcf of net natural gas storage capacity. It also owns interests in nearly 3,000 MW of renewable generation capacity.

Key Investment Data

9. Superior Plus

Superior Plus is a premier North American energy distributor and marketer. The company is the No.1 retail propane distributor in Canada and ranks amongst the top ten players in the U.S. 

Superior’s Canadian propane distribution includes Superior Propane, Superior Gas Liquids, and United Pacific Energy. The U.S. propane distribution includes Superior’s retail energy distribution business in the Eastern U.S., upper Midwest, and California.

Superior Plus divested its Specialty Chemicals business that transformed the company into a pure‐play energy distribution company. The company deals in the distribution and retail marketing of propane products, distribution of liquid fuels including heating oil and propane gas, and also provides wholesale liquids marketing services.

Key Investment Data

10. First National Financial

First National Financial Corp is Canada’s largest non-bank mortgage lender. In the last thirty years of its business, the company has built a leading reputation in real estate financing with over $106 billion in Mortgages Under Administration and is the largest commercial mortgage lender in the country today.

More than 80% of the MUA is insured mortgages, followed by conventional style family residential mortgages (13%) and multi-unit residential and commercial mortgages (6%). It maintains diverse and flexible funding sources and is known for its prudent and conservative underwriting practices.

Size, large national presence and focus on mortgage financing are key differentiators for the company. The Canadian mortgage market is valued at over $1.1 trillion and given its leading reputation, First National is in a good position to benefit from this opportunity.

Key Investment Data

Methodology

The top 10 high yield stocks identified are based on the highest yield of dividend stocks excluding REITs within the Canadian Dividend Screener covering over 170 of the top Canadian stocks. For a REIT list, se the Canadian REIT list.

Please note that generating income with a high yield is a great short-term reward but it’s not without risks. Either a dividend cut is imminent or growth is limited. Make sure you look for the right stock for your portfolio and that you really understand the business you are investing in. I like to look at the Chowder Score to assess growth for both the stock appreciation and the dividend.