Valuations are very high right now. Most investors already know this. However, looking at where some dividend-paying stocks are currently trading, you’d think the valuations really aren’t that high.
After all, many high-quality companies continue to pay dividends far above long-term bond yields. For income investors, this is a good thing.
It turns out that there are a number of great options to choose from on the TSX. Here are two of my top picks right now in this regard.
High Dividend Equities: Algonquin Energy
For 2021, Algonquin energy (TSX: AQN) (NYSE: AQN) has already increased its dividend by 10%. It’s a good start for investors who bought earlier this year.
In the coming years, further dividend increases are expected. After all, the growth in revenue and cash flow for this business is impressive. Investing in new capital intensive projects is expected to pay off over time. Indeed, long-term investors should like what they see.
What I particularly like about Algonquin is where this company invests its money. Indeed, Algonquin is today an increasingly important player in the field of renewable energy. Over the past decade, Algonquin has made smart and timely bets on increasing demand for renewable energy. I think the company will be right and investors will benefit from this strategy.
Remaining in the energy sector, a dividend stock that can be overlooked is Enbridge (TSX: ENB) (NYSE: ENB). Indeed, it is probably not because of the performance of the company. Currently, Enbridge shares yields 6.6%. Compared to where bond yields are today, it’s amazing.
I think it’s amazing because of the stability of Enbridge’s cash flow. As a pipeline operator, Enbridge can be confident that its cash flow will remain stable or increase over time. For investors, this offers a yield similar to that of bonds which is extremely attractive.
In addition, the size of Enbridge deserves to be highlighted. The fact that the company transports 20% of the gas consumed in the United States and a quarter of the oil produced in North America makes it one of the highest dividend-paying stocks by scale on this list. Additionally, Enbridge’s rapidly growing green power assets provide a growth thesis in this capacity which in my opinion is overlooked.
The real estate industry has been one of the hottest lately. However, for retail oriented actions such as SmartCentres REITs (TSX: SRU.UN), maybe not so much.
That said, this company’s blue chip customer base has also provided extremely stable cash flow over time. This has allowed SmartCentres to regularly pay its monthly dividend for over 12 years. This includes the crisis periods of 2009 and 2020.
I like this.
I also love that SmartCentres is working on building its multi-family portfolio. Under the company’s Smart Living banner, SmartCentres plans to bring a huge amount of supply to high demand markets. This seems to me to be the recipe for success.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We are straight! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer, so we post sometimes articles that may not conform to recommendations, rankings or other content.
Foolish contributor Chris MacDonald has no position on the stocks mentioned. The Motley Fool owns shares and recommends Enbridge. The Motley Fool recommends Smart REIT.