Top 10 Canadian High Yield Stocks – May 2020

Top High Yield Stocks

Are you looking for income with 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 prices 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.

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#10 – Bonterra Energy

BNE - Bonterra EnergyBonterra Energy is a leading oil and natural gas company in Canada. The company has large under-developed properties with long reserve lives, located at low-risk drilling locations across western Canada. Its primary assets are located in Pembina and Willesden Green Cardium fields in central Alberta, which accounts for nearly 97% of the company’s overall production. Bonterra is one of the leading operators in the Pembina Cardium, which is amongst the largest Canadian oil fields. The company has an average production output of more 13,200 boepd (in 2018). Bonterra Energy maintains conservative annual production management which helps in delivering consistent returns even during commodity pricing fluctuations. The company is known for its low cost operation which is driven by low corporate decline rates. Bonterra’s large presence in Pembina oil fields further supports efficient operations and offers strong growth potential with a large inventory of low-risk and economical undrilled locations.

Investment Data

#9 – Russel Metals

RUS - Russel MetalsRussel Metals is one of the North America's biggest metal distributors and processors. The company is one of key distributor of metal products such as aluminium, stainless steel, carbon hot rolled and cold finished steel, pipe and tubular products as well as different types of non-ferrous specialty metals. Russel Metals gets 35% of its revenues from the US with the remaining 65% of the sales comes from the Canadian market. The key business segments of the company are energy products( 38% of revenues) , metal service centers (51% of revenues) and steel distributors (11% of revenues). In terms of products, valves, fittings, pipe products and plates account for the lion’s share of the company’s sales. The company has a large distribution network of 51 Canadian and 12 US centres which help supply 28,000 customers. Russel Metals provides processing and distribution services to consumers in a diverse set of industries such as shipbuilding, equipment manufacturing, construction, shipbuilding, as well as mining and petroleum. Its well spread out network is strategically located to service customers in key Canadian and US energy markets.

Investment Data

#8 – Parson Systems

Pason Systems provides fully integrated drilling data solutions to its clients for accessing their critical drilling information. The company engages in providing specialized data management systems for drilling rigs. Its plethora of solutions includes data acquisition, well site reporting, remote communications, and web-based information management. Pason operates in three geographic segments: Canada, the U.S., and International (Latin America, Offshore, the Eastern Hemisphere, and the Middle East). Pason Systems’ revenues are divided into drilling data (51% of 2018 revenues), mud management and safety (28%), communications (9%), drilling intelligence (8%), analytics and other (4%). With more than 30 years of experience, Pason Systems has built an end-to-end portfolio to analyze clients’ drilling data which results in better operational performance and the cost-efficiencies. Clients prefer Pason Systems for its fast, flexible, and intelligent real-time solutions which enable collaboration between the rig and the office. Pason Systems’ caters to the oil companies with the help of technologies that monitor critical operations at the rig and supports improved rig uptime, efficiency and costs.

Investment Data

#7 – Mullen Group

Mullen Group is one of the leading Canadian suppliers of trucking and logistics services. It provides a wide range of transportation and related services to the oil and natural gas industry in western Canada. Mullen Group’s operating businesses are divided into two business segments, trucking/logistics (~70% of 2018 revenues) and oilfield services (30%). The company has operations in both the U.S. and Canada. It is investing aggressively into acquisitions and for strengthening its business units and core technologies.The trucking and logistics segment provides a wide range of transportation services to customers in the US and Canada. In addition, it also provides logistics, warehousing, distribution and intermodal services in western Canada. The oilfield services segment provides specialized transportation, dewatering, and drilling services to the oil and gas industry. Mullen Group along with its subsidiaries such as Cascade, Grimshaw, Formula Powell, TREO, Smook, DWS, etc. caters to a diversified list of customers in the shipping and upstream, midstream and downstream segments of the oil and natural gas industry.

Investment Data

#6 – Cineplex

CGX - CineplexCineplex is a leading diversified entertainment and media company in Canada. It is Canada’s largest film exhibitor running 165 theatres and 1692 screens across the country. Cineplex’s operations are primarily conducted through three reportable segments: film entertainment and content (76% of revenues), media (11%), and amusement and leisure (13%). Theatre exhibition is the core business of Cineplex. Cineplex entertains more than 70 million guests annually through its network of theatres and entertainment centers across the country. In addition, it operates digital commerce, food service, alternative programming, digital place-based media, amusement solutions, and an online esports platform. Cineplex’s core media strengths and infrastructure are its biggest competitive advantages. Box office revenues account for the largest portion of Cineplex’s revenues. The company continues to introduce tailored entertainment experiences for communities across the country.

Investment Data

#5 – Chemtrade Logistic

CHE.UN - Chemtrade LogisticsChemtrade 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. It is one of North America’s largest suppliers of sulfuric acid and inorganic coagulants for water treatment. The company is known for its reliable products and global distribution channels. Chemtrade’s business segments are sulphur products and performance chemicals (SPPC - 34% of Q3’18 revenues), water solutions and specialty chemicals (WSSC - 27%), and electrochemical (39%). 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. Its SPPC business derives 60% of revenue from risk shared contracts, while its WSSC business segment includes specialty chemicals with distinct barriers to entry.

Investment Data

#4 – Brookfield Property Partners

Brookfield Property Partners is a diversified global real estate company. It owns and develops a wide range of properties such as office space, retail, multifamily, industrial, hospitality, triple net lease, self-storage, and houses. Office space (41%) and residential (42%) account for more than 80% of total invested capital (in 2018), followed by LP investments (17%). Brookfield Property owns residential apartments in diverse, urban and suburban locations in over 20 U.S. states. Most of its properties have above 90% occupancy. Brookfield Property has a good diversification across geographies as well as real estate sectors. The U.S. is its largest market accounting for 70% of AUM, followed by Canada, UK and Europe, Brazil, Asia, and Australia. The company has almost tripled its assets through strategic acquisitions in the last five years. Most of its projects are in supply-constrained core markets having high entry barriers. Ownership of iconic properties in some of the world’s most dynamic markets is its strong competitive advantage. Brookfield is set to benefit from a growing urban population in the US.

Investment Data

#3 – Alaris Royalty Corp

AD - Alaris RoyaltyAlaris 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. By industry, 58% of its investments are in business services, 35% in industrials, and 7% in consumer products and services. 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.

Investment Data

#2 – ShawCor

ShawCor is a leading integrated energy services company. It specializes in technology-based products and services for the pipeline, pipe services, petrochemical, and industrial markets. The company operates eight divisions, with more than 100 manufacturing and service facilities in 25 countries around the world. ShawCor has more than 85 years of pipeline services experience around mission critical assets in the world. The company provides pipe coating, oilfield and integrity management solutions, and advanced products and services. It leverages its innovative technology to simulate service conditions and integrate tracking, asset management and other informative capabilities which helps customers to make better decisions. ShawCor is continually investing to expand its global presence, improve technologies, and make relevant acquisitions to ward off competition. The company is expecting robust growth driven by the increasing demand for new LNG infrastructure and high levels of drilling and completion activity in the U.S. market.

Investment Data

#1 – Ensign Energy Services

ESI - Ensign Energy ServicesEnsign Energy Services is a global enterprise that provides a unique edge in oilfield service. We are defined by our inspired thinking; our innovative use of technology; our confident, dedicated, well-trained workforce; and our culture of achievement. We are built to serve. We deliver a superior customer experience and trusted, reliable performance.

We are among the world’s strongest, fastest-growing energy services companies. Ensign is equipped with industry leading technology and empowered by a culture of innovation and action. Our employees across the globe are united in a commitment to service. We are able to deliver safety and excellence to our customers where they need us, when they need us.

Investment Data
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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 120 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.

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.
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