Should You Buy the 5 Highest-Paying Dividend Stocks on the TSX?

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Written by Brian Paradza, CFA at The Motley Fool Canada

There is a time for everything, and a time to chase hefty dividend yields may come at some point in your retirement planning strategy execution. However, not all high-yield dividend stocks are good and healthy buys. Lets look at five of the highest-paying Canadian dividend stocks and their prospects.

Northwest Healthcare REIT

Investors in search of TSX dividend stocks paying ultra-high income yields may be attracted to Northwest Healthcare Properties Real Estate Investment Trust’s (TSX:NWH.UN) monthly distributions yielding more than 12.3% annually today. The REIT pays a juicy yield that may boost monthly passive income in your portfolio. However, the trust could be a speculative investment and a value trap whose capital losses may swallow your capital.


On a positive note, Northwest Healthcare REIT reported 12.5% year-over-year revenue growth during the second quarter of 2023. Same property net operating income (NOI) increased by 5.1% thanks largely to rent indexation. Portfolio occupancy rates remain strong at 96% across the trust’s 231 property portfolio and remaining lease maturities average a lengthy 13.5 years.

That said, the distribution is at risk as the trust paid out 153.8% of its adjusted funds from operations (AFFO) during the quarter. The payout may not be sustainable as the trust faces higher financing costs, lost a key investor in its planned U.K. portfolio expansion strategy, and saw its management fees decline.

Northwest Healthcare REIT units have lost 31.7% in value so far this year.

Peyto Exploration and Development

Peyto Exploration and Development (TSX:PEY) is an energy stock that touts a high forward dividend yield of 11.1% and a low valuation given a low forward price-to-earnings (PE) ratio of 6.8. Peyto stock’s juicy dividend yield seems supported given a decent earnings payout rate under 50%.

That said, the exploration and contracting company’s earnings remain tied to energy industry investment commitments to growth projects, and take hits from falling natural gas prices. Growth investments may shrink given the world’s increasing focus on renewable energy.

Bay Street Analysts project a 13% average annual earnings decline rate on Peyto stock over the next five years. The cyclical stock may experience falling share prices if earnings decline as predicted.

First National Financial

Financial stocks do well as dividend stocks to buy for an income-oriented portfolio, and First National Financial (TSX:FN) stock is one of the mortgage origination industry’s best players to hold for its 6.3% dividend yield and potential capital gains as the Canadian housing market recovers. The dividend is well-covered given a payout rate just below 70%, and the company raised payouts every year over the past seven consecutive years.

A stronger mortgage market could strengthen the business once Canadians adjust and get used to higher interest rates. Bay Street analysts project a strong 16.1% average annual earnings growth rate for First National Financial over the next five years.

Even better, First National Financial’s preferred stock (TSX:FN.PR.B) should provide an even sweeter yield above 12.6% annually. Preferreds are an income investor’s friend as their dividends rank above that of common shares, and the yields can be secure, as long as the company pays a dividend to common shareholders. That said, preferred stock investors give up capital upside. This investment option normally lacks price appreciation.


Canadian energy pipelines giant Enbridge (TSX:ENB) is a cash flow generating machine, and a reliable dividend cash cow to hold in a dividend-powered income portfolio. Although it pays out more than 100% of its annual profits every year, Enbridge’s cash flow generation capacity is much better than its earnings profile (the latter is affected by huge depreciation and amortization charges). Enbridge pays a little over 70% of its distributable cash flow as dividends. It can manage to sustain its quarterly dividends yielding 7.6% annually.

For better yields, investors could buy Enbridge’s several tranches of preferred shares with yields ranging from 8.5% to 9.3% annually. Capital growth prospects are limited, though.

TC Energy Corp.

TC Energy Corp. (TSX:TRP) is a potentially undervalued energy stock that income investors could buy on the dip and lock in a juicy 7.7% dividend yield. Following 23 years of consecutive dividend increases, a cash-flow-rich TC Energy can afford to sustain its hefty dividend next year, and beyond. A planned spin-off of its liquids pipelines could unlock deleveraging opportunities. As a result, the split companies could offer better capital growth.

The post Should You Buy the 5 Highest-Paying Dividend Stocks on the TSX? appeared first on The Motley Fool Canada.

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Fool contributor Brian Paradza has no position in any of the stocks mentioned. The Motley Fool recommends Enbridge and NorthWest Healthcare Properties Real Estate Investment Trust. The Motley Fool has a disclosure policy.