Yahoo Finance 3 Top Canadian Dividend Stocks With Yields Over 5%
Dividend stocks with high yields continue to be an attractive option for income investors. As dividend yields are inversely proportional to the stock price, a high yield might indicate that the stock is undervalued and trading at a cheap valuation, providing investors with an opportunity for capital appreciation as well.
TransAlta Renewables
Shares of TransAlta Renewables (TSX:RNW) are trading at $18.15 at writing. The stock has gained 50.6% in the last year compared to the S&P 500 gains of 20.6%. Despite this impressive bull run, TransAlta Renewables has a forward dividend yield of 5.2%.
The company operates over 30 renewable energy facilities in Canada, Australia and the United States, generating over 2,400 megawatts of power annually.
TransAlta is part of the utility business, a recession-proof segment, making it one of the best defensive picks for investors.
TransAlta is expected to increase sales by 5.1% in 2020 while earnings are expected to rise by 9.7% this year. The stock is trading at a forward price-to-earnings multiple of 23, which might be expensive given the company’s growth metrics. As stated earlier, it’s one of the safest bets in a sell-off.
Analysts tracking TransAlta Renewables have a 12-month target price of $16 which is 12% below the current trading price.
Canadian Imperial Bank of Commerce
The Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) is one of the top Canadian stocks to bet on. It has underperformed the broader markets in the last year, but with a juicy dividend yield of 5.3%, CIBC is one of the best buys for dividend investors.
CIBC is one of the top five banks in Canada with a market cap of $48.6 billion. It provides personal and corporate banking services to individuals and businesses. In fiscal 2020, analysts expect company sales to grow 3.4% to $19.25 billion, while in 2021 sales are estimated to rise by 4.3% to $20 billion.
Comparatively, earnings are estimated to grow by 0.7% in 2020 and 4.2% in 2021. CIBC stock is trading at an attractive forward price to earnings multiple of 8.7.
It has increased dividend payments by 30% over the last five years and with a payout ratio of 50% can continue to keep doing so in the upcoming quarters.
Enbridge Inc.
Enbridge Inc. (TSX:ENB)(NYSE:ENB) is a domestic stalwart and has been a solid wealth creator for investors over the years. It has been one of the top-performing Canadian large-cap stocks since the start of 2019.
Enbridge stock has gained over 30% since 2019 and the company has a forward dividend yield of 5.9%. Enbridge stock is trading at a forward price to earnings multiple of 19 and analysts expect company earnings to fall by 1% in 2020 and then rise 9.1% in 2021.
The company can easily increase dividend payouts going forward as it expects distributable cash flow per share to grow at an annual rate of 5% and 7%. Last year, its distributable cash flow rose 21% to $9.2 billion.
Enbridge is part of an industry which has high entry barriers and regulations. It has pumped in billions of dollars in capital expenditure which in turn will drive top-line growth over the next few years.
The company’s stable cash flows, strong balance sheet and growth prospects make it a solid long-term buy.
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The Motley Fool owns shares of and recommends Enbridge. Fool contributor Aditya Raghunath has no position in any of the stocks mentioned.
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