The dividend yield is one of the important ratios to calculate for dividend stocks. It is calculated as the total annual dividends paid per share, divided by the current stock price. Movements in the stock price will change the dividend yield. When you’re looking for income-producing stocks, dividend yield is typically your most important consideration. The best companies to invest in for a high dividend yield have strong positions in healthy industries. They also incorporate strong management that makes the right moves to remain competitive in changing marketplaces.
Dividend yields are a sign of investment quality. Some good companies reinvest profit to spur growth instead of paying dividends. But fraudulent and failing companies are hardly ever dividend-paying stocks. So if you only buy stocks that pay dividends, you’ll automatically stay out of almost all the market’s worst stocks.
For a true measure of stability, focus on those companies that have maintained or raised their dividend yields during a recession or stock-market downturn. That’s because these firms leave themselves enough room to handle periods of earnings volatility. By continually rewarding investors, and retaining enough cash to finance their businesses, they also provide an attractive mix of safety, income and growth-and are a big part of a successful long term investment strategy
High dividend yields can be a warning sign, however
When looking for high dividend stocks, you should avoid the temptation of “reaching for yield.” That is, choosing investments purely because they offer a high current yield. That’s because a high yield may signal danger rather than a bargain, if it reflects widespread investor skepticism that a company can keep paying its current dividend. Dividend cuts always undermine investor confidence, and can quickly push down a company’s stock price.
While a high-and safe-yield dividend is generally favourable, be aware that it is only one of many indicators that we look for in a good stock. You need to look at the big picture, so you get a realistic view of a company’s long-term prospects. As well, at TSI Network, we recommend our three-part Successful Investor strategy:
Discover how to put an extra strength in your portfolio with our specific advice on how to identify high-quality dividend stocks. It’s all in our newly updated report. Dividend Paying Stocks: How High Dividend Stocks Can Supercharge Your Income Investing.
THOMSON REUTERS CORP. $68 (Toronto symbol TRI; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 504.9 million; Market cap: $34.3 billion; Price-to-sales ratio: 3.0; Dividend yield: 2.8%; TSINetwork Rating: Above Average; www.thomsonreuters.com) recently sold 55% of its Financial & Risk (F&R) business to a consortium led by Blackstone… Read More
ENBRIDGE INC. $42 (Toronto symbol ENB; Conservative Growth and Income Portfolios, Utilities sector; Shares outstanding: 1.8 billion; Market cap: $75.6 billion; Price-to-sales ratio: 1.6; Dividend yield: 7.0%; TSINetwork Rating: Above Average; www.enbridge.com) continues to sell some of its less-important assets to help pay down the debt it… Read More
CANADIAN NATIONAL RAILWAY CO. $106 (Toronto symbol CNR; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 728.3 million; Market cap: $77.2 billion; Price-to-sales ratio: 5.6; Dividend yield: 1.7%; TSINetwork Rating: Above Average; www.cn.ca) recently signed a three-year contract to ship 50,000 to 60,000 barrels of Cenvous’s… Read More
In response to weaker oil and natural gas prices, Encana has decided to aggressively expand in the U.S., while Cenovus is cutting its output.
We’re confident that both approaches will pay off. However, Encana’s big, newly announced acquisition increases its risk, which is why the stock… Read More
GREAT-WEST LIFECO INC. $28 (Toronto symbol GWO; Conservative Growth and Income Portfolios, Finance sector; shares outstanding: 988.4 million; Market cap: $27.7 billion; Price-to-sales ratio: 0.6; Dividend yield: 5.6%; TSINetwork Rating: Above Average; www.greatwestlifeco.com) is Canada’s second-largest insurance company, after Manulife Financial. It also offers mutual funds and… Read More
BANK OF MONTREAL $91 (Toronto symbol BMO; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 639.3 million; Market cap: $58.2 billion; Price-to-sales ratio: 2.6; Dividend yield: 4.4%; TSINetwork Rating: Above Average; www.bmo.com) earned $1.53 billion in the quarter ended October 31, 2018. That’s up 16.8% from… Read More
MAPLE LEAF FOODS INC. $28 (Toronto symbol MFI; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 124.4 million; Market cap: $3.5 billion; Price-to-sales ratio: 1.0; Dividend yield: 1.9%; TSINetwork Rating: Average; www.mapleleaffoods.com) sells fresh and prepared meats under the Maple Leaf and Schneider brands.
The company now plans to… Read More
RIOCAN REAL ESTATE INVESTMENT TRUST $25 (Toronto symbol REI.UN; Aggressive Growth Portfolio, Manufacturing & Industry sector; Units outstanding: 306.8 million; Market cap: $7.7 billion; Price-to-sales ratio: 6.4; Dividend yield: 5.8%; TSINetwork Rating: Average; www.riocan.com) owns all or part of 250 shopping centres and other properties across Canada… Read More
Loblaw recently transferred its majority stake in Choice Properties REIT to its parent company, George Weston. As a result of that reorganization, Loblaw can now focus exclusively on expanding profits for its main retailing operations.
For example, the company recently launched a new enhanced delivery program… Read More
CALIAN GROUP LTD. $28 (Toronto symbol CGY; High-Growth Dividend Payer Portfolio, Manufacturing & Industry sector; Shares outstanding; 7.8 million; Market cap: $218.4 million; Dividend yield: 4.0%; Dividend Sustainability Rating: Above Average; www.calian.com) has two main operations: Business and Technology Services (70% of revenue) provides clients with engineers, health-care… Read More
Learn everything you need to know in 'The Canadian Guide on How to Invest in Stocks Successfully' FREE Special Report from The Successful Investor.
How to Invest In Stocks Guide: Find 10 factors that make your investments safer and stronger.
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