The Best High Yield Dividend Stocks: Too Good To Be True?

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. Labrador Iron Ore Royalty

Labrador Iron Ore Royalty Corporation (LIORC) is a Canadian investment company that holds interests in Iron Ore Company of Canada (IOC), a leading North American producer and exporter of premium iron ore pellets and high-grade concentrate. The company has been producing and processing iron ore since 1954 and is among the top five producers of seaborne iron ore pellets in the world. 

LIORC holds a 15.1% equity interest in IOC and receives a 7% gross overriding royalty and a 10 cent per tonne commission on all iron ore products produced, sold, and shipped by IOC. Generally, LIORC pays cash dividends from its net income to the maximum extent possible, subject to the maintenance of appropriate levels of working capital. Since inception, the company has paid out 99% of standardized cash flow. 

LIORC does not control or operate IOC. However, LIORC is indirectly exposed to environmental, social, and other risks arising from IOC’s operations.

Key Investment Data

  • Ticker: tse:lif
  • Sector: Basic Materials
  • Industry: Steel
  • Market Cap: 2.46B
  • Market Cap Group: Mid Cap
  • P/E: 6.39
  • Dividend Yield: 12.26%

2. Canoe EIT Income Fund

EIT.UN Canoe Financials 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

  • Ticker: tse:eit.un
  • Sector: Financial Services
  • Industry: Asset Management
  • Market Cap: 2.08B
  • Market Cap Group: Mid Cap
  • P/E: 2.62
  • Dividend Yield: 9.27%

3. Chemtrade Logistic

CHE.UN Chemtrade Logistics Chemtrade is a leading global provider of industrial chemicals and services. Chemtrade provides industrial chemicals and services primarily in North America and worldwide. It also provides industrial services such as processing by-products and waste streams. 

The company is known for its reliable products and global distribution channels. It is one of North America’s largest suppliers of sulfuric acid and inorganic coagulants for water treatment.

The company enjoys significant market shares in niche specialty chemicals. A diversified product portfolio and large geographic footprint are the company’s strengths and mitigate commodity risks. Chemtrade has a long history of acquisitions and successful integrations which has resulted in a more resilient business.

Key Investment Data

  • Ticker: tse:che.un
  • Sector: Basic Materials
  • Industry: Specialty Chemicals
  • Market Cap: 0.77B
  • Market Cap Group: Small Cap
  • P/E: 0.00
  • Dividend Yield: 8.32%

4. Fiera Capital

FSZ Fiera Capital Fiera Capital Corporation is a global independent asset management firm. The company delivers customized multi-asset solutions across traditional and alternative asset classes to institutional, retail and private wealth clients across North America, Europe and key markets in Asia.

The company strives to be at the forefront of investment-management science and we are passionate about creating sustainable wealth for clients.

Fiera Capital recognizes that the investment landscape is constantly evolving and seeks to draw on the global industry’s most innovative and diverse offerings to craft strategies that meet the needs of any client, anywhere they are located. 

Key Investment Data

  • Ticker: tse:fsz
  • Sector: Financial Services
  • Industry: Asset Management
  • Market Cap: 0.87B
  • Market Cap Group: Small Cap
  • P/E: 32.47
  • Dividend Yield: 8.51%

5. The KEG Royalties Income

KEG.UN The Keg The Keg Royalties Income Fund (the “Fund”) is a limited purpose, open-ended trust which owns The Keg trademarks and other related intellectual property (collectively, the “Keg Rights”) from Keg Restaurants Ltd. (“KRL”). The Partnership, in turn, granted KRL an exclusive licence to use the Keg Rights for a term of 99 years pursuant to a licence and royalty agreement, which obligates KRL to make monthly royalty payments to the Partnership equal to 4% of gross sales of Keg restaurants included in a specific royalty pool (the “Royalty Pool”).

The key feature of the Fund is that royalty income is based on the top-line, gross sales of Keg restaurants in the Royalty Pool and not on the profitability of either KRL or the Keg restaurants in the Royalty Pool. Moreover, the Fund is not subject to the variability of income or expenses associated with an operating business. The Fund’s only expenses are nominal administrative expenses and interest on non-amortizing term debt. Thus, the success of the Fund depends primarily on the ability of KRL to maintain and increase the gross sales of the Keg restaurants in the Royalty Pool.

Key Investment Data

  • Ticker: tse:keg.un
  • Sector: Consumer Cyclical
  • Industry: Restaurants
  • Market Cap: 0.17B
  • Market Cap Group: Micro Cap
  • P/E: 0.00
  • Dividend Yield: 7.79%

6. Timbercreek Financials

TF Timbercreek Timbercreek Financial is a leading non-bank commercial lender providing shorter duration, structured financing solutions to commercial real estate investors. They invest directly in a diversified portfolio of high-quality structured mortgage loans primarily secured by stabilized, income-producing commercial real estate, such as multi-residential, office, and retail buildings located in urban markets across Canada.

Their focus on lending against income-producing real estate ensures that there is income from the property to service the loan, which reduces the likelihood of default. Their refined, service-oriented approach to lending allows them to meet the needs of borrowers, including faster execution and more flexible terms that are not typically provided by Canadian financial institutions. 

This segment of the Canadian borrower market is typically under-serviced by commercial banks that are reluctant to dedicate resources to these smaller, shorter-term mortgage investments and cannot typically provide the structure required to meet the borrower’s needs. Our borrowers are sophisticated commercial real estate investors, typically looking for financing to bridge a period of up to five years. 

Key Investment Data

  • Ticker: tse:tf
  • Sector: Financial Services
  • Industry: Mortgage Finance
  • Market Cap: 0.79B
  • Market Cap Group: Small Cap
  • P/E: 20.83
  • Dividend Yield: 7.24%

7. Alaris Royalty Corp

AD.UN Alaris Equity Parnters Alaris is a Canadian company providing preferred equity financing to private businesses across North America. The company uses a unique structure to service a niche in the private capital markets.

About 91% of Alaris’ investment is in U.S. based companies and the balance is in Canadian companies. Alaris focuses on diversified industries such as business, professional, information and healthcare services, distribution and logistics, industrials and consumer products.

Alaris chooses to partner with companies having steady cash flows, proven management teams and are not very capital intensive. Its interest in the partner companies could be in the form of a preferred partnership interest, equity interest, loan, or ownership of intellectual property. The company provides cash financing to partners in exchange for a predetermined distribution.

Key Investment Data

  • Ticker: tse:ad.un
  • Sector: Financial Services
  • Industry: Asset Management
  • Market Cap: 0.82B
  • Market Cap Group: Small Cap
  • P/E: 6.03
  • Dividend Yield: 7.45%

8. Enbridge

ENB - 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.

It 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

  • Ticker: tse:enb
  • Sector: Energy
  • Industry: Oil & Gas Midstream
  • Market Cap: 105.92B
  • Market Cap Group: Large Cap
  • P/E: 18.07
  • Dividend Yield: 6.70%

9. Keyera

KEY - Keyera Corp Keyera Corp. is one of the largest independent midstream energy companies with extensive interconnected assets across Canada. The company caters to the needs of oil and gas producers in the Western Canada Sedimentary Basin, and provides NGL gathering and processing, fractionation, storage, transportation, logistics and marketing services.

Keyera’s core infrastructure is strategically located in key producing areas of Western Canada Sedimentary basin and Edmonton/ Fort Saskatchewan energy hub. The company also markets iso-octane, propane, butane, condensate and crude oil to customers in Canada and the United States.

It operates through Gathering and Processing, Liquids Infrastructure and Marketing segments. Keyera has strong expertise in operating complex energy processing facilities and provides a full range of essential midstream services to its customers.

Key Investment Data

  • Ticker: tse:key
  • Sector: Energy
  • Industry: Oil & Gas Midstream
  • Market Cap: 6.30B
  • Market Cap Group: Mid Cap
  • P/E: 37.98
  • Dividend Yield: 7.01%

10. Extendicare

EXE Extendicare Extendicare is a leading provider of senior health care and services across Canada. It operates through a network of 120 senior care and retirement living centers and home health care operations, under the Extendicare, Esprit Lifestyle and ParaMed brands.

Extendicare is at the forefront of senior care across Canada serving more than 85,000 seniors across the country. It owns and operates 58 long-term care homes across Ontario, Manitoba, Saskatchewan, and Alberta.

The company also owns 10 retirement communities in Ontario and Saskatchewan and provides home health care solutions across 35 locations in Canada. Extendicare is in a good position to gain from a growing aging population commanding care services.

Key Investment Data

  • Ticker: tse:exe
  • Sector: Healthcare
  • Industry: Medical Care Facilities
  • Market Cap: 0.65B
  • Market Cap Group: Small Cap
  • P/E: 20.90
  • Dividend Yield: 6.69%

Questrade offers the cheapest trades!
The best broker for small accounts and new investors.
Quickly create your account online and get started with $50 in Free Trades.


Methodology

The top 10 high yield stocks identified are based on the highest yield of dividend stocks excluding REITs within the Canadian Dividend Performance List 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.

If you are interested in more details, the Canadian Dividend Performance List provides many more data points to help make your investment decision.

Build Your OWN Top List

My portfolio is generating over 12% annual returns since 2009. It's not from the beginning of the year or from 2019, it's from 2009 !!! That's a consistent return which means using the rule of 72, I double my portfolio every 6 years.

My approach is simple but you need key data that I have cultivated with the Dividend Snapshot Screeners. No other investment services provide you with easy to understand data but also actionable data. No hidden magic.

In fact, I have tried all of the investment services for dividend investors like a crash test dummy of investment services. Just ask me, and you'll learn why there was nothing I could use out there and build the Dividend Snapshot Screeners.

DISCLOSURE: Please note that I may have a position in one or many of the holdings listed. For a complete list of my holdings, please see my Dividend Portfolio.

DISCLAIMER: Please note that this blog post represents my opinion and not an advice/recommendation. I am not a financial adviser, I am not qualified to give financial advice. Before you buy any stocks/funds consult with a qualified financial planner. Make your investment decisions at your own risk – see my full disclaimer for more details.