Income-oriented investors seek high dividend yields but also aim for security and sustainability. To determine what constitutes an ultra-high yield that is still safe, a benchmark can be established using the Canadian stock market yield. Currently, the market offers a cash distribution yield of approximately 3% through an index ETF.
For the purpose of this analysis, a dividend yield of 6% or higher can be considered ultra-high. Here are three dividend stocks with ultra-high yields that investors may find appealing, listed in descending order of yield.
Firstly, Gibson Energy (TSX:GEI) is a liquids infrastructure company with a dividend yield of 7.5%. Although its cash flow generation has historically been cyclical, the company has shifted towards more stable infrastructure assets with contracted cash flows, making its dividend more sustainable. Moreover, Gibson Energy has consistently increased its dividend since 2020 and maintains a reasonable level of leverage. Analysts also believe there is growth potential in the stock, offering an attractive opportunity for investment.
Secondly, TELUS (TSX:T) is a renowned telecom company with a dividend yield of 7.1%. With a strong track record of dividend growth and a history of raising dividends, TELUS is a reliable income generator. Despite recent market performance, the stock is considered undervalued by analysts, offering potential for future re-rating.
Lastly, Bank of Nova Scotia (TSX:BNS) stands out as a leading Canadian bank stock with a dividend yield of 6.7%. Despite its underperformance compared to peers, the stock is attractively valued with a low price-to-earnings ratio. The appointment of a new CEO brings optimism for potential earnings growth and multiples expansion, making BNS stock a compelling long-term investment opportunity.
In conclusion, these ultra-high yield dividend stocks present attractive opportunities for income investors seeking both high yields and potential for capital appreciation.
