Investing in dividend stocks can be exciting. You put your money to work and immediately start to earn a return on your investment. But itâs essential to find the highest-quality stocks to buy that can sustain their dividends rather than just look for which ones offer the highest yield.
A high yield is ideal, but more importantly, the company should at least be able to sustain the dividend. Plus, youâll also want to consider how much growth potential the stock offers on top of the returns you can earn from dividend payments.
So with that in mind, if youâre looking for top-notch dividend stocks that offer attractive yields, here are five spectacular picks to consider adding to your portfolio.
One of the best high-yield dividend stocks in Canada
One of the highest-yielding stocks on the TSX and an ideal investment for passive income seekers is Diversified Royalty (TSX:DIV).
Diversified Royalty aims to acquire royalty streams from high-quality, multi-location companies in North America. So far, it has seven royalty partners, each operating in a different industry, which helps to diversify its sales and reduce risk for investors.
Furthermore, since Diversified Royalty looks to partner with solid businesses that are often growing, the royalty income it receives can consistently grow each year as well. Plus, the company is consistently looking to partner with more businesses and continue to diversify its revenue.
Therefore, not only does the dividend stock offer a current yield of more than 8.5%, but it has also increased the dividend four different times in the last three years since the pandemic hit.
A top restaurant stock
Another stock similar in many ways to Diversified Royalty is Pizza Pizza Royalty (TSX:PZA). While it only receives royalties from Pizza Pizza and Pizza 73 restaurants, the fact that it earns a top-line royalty and only needs to worry about system-wide sales across the country helps to reduce risk considerably.
In addition, it also keeps revenue from fluctuating too much year over year or quarter over quarter. This helps make Pizza Pizza’s revenue, earnings per share and free cash flow highly predictable, which is why Pizza Pizza can aim to return essentially all of its earnings back to investors.
And right now, even with the stock’s strong performance this year, it still offers investors a yield of 6.1%.
One of the best REITs to buy for passive income
Many REITs also make excellent dividend stocks, but one of the best is CT REIT (TSX:CRT.UN). CT REIT’s majority owner is Canadian Tire. In addition, Canadian Tire is also its largest tenant accounting for roughly 90% of its revenue.
This helps make CT REIT highly reliable, especially since Canadian Tire is one of the best-known brands in Canada and is constantly growing both organically and by acquisition.
Today, CT REIT offers a yield of 6.2% and has a dividend growth streak of 10 years.
One of the best blue-chip dividend stocks in Canada
Telecommunications is another industry ideal for passive income seekers. One of the major telecom players in Canada and a top dividend stock to buy is BCE (TSX:BCE).
BCE is well-positioned in an industry with massive barriers to entry and a tonne of long-term growth potential. In addition, much of the infrastructure it owns consists of long-life assets that require little maintenance and allows BCE to earn significant cash flow each year.
This makes the telecom an ideal dividend stock, and right now, it offers a yield of roughly 6.9% and a dividend growth streak of 14 years.
A top energy stock for passive income seekers
Finally, Freehold Royalties (TSX:FRU) is an intriguing energy stock to buy if you’re looking for a high-yield dividend stock.
Instead of producing energy itself, it owns the land that other energy companies use to produce oil and gas in exchange for a royalty.
This helps to lower risks considerably, and it also allows Freehold to earn tonnes of cash flow, which it uses to fund the dividend. In fact, while the stock offers a yield of roughly 7.9%, it’s expected to have a payout ratio of just 68% this year.
So if you’re looking for a reliable high-yield dividend stock to buy now, Freehold is one of the best in Canada.
Before you consider BCE, you’ll want to hear this.
Our market-beating analyst team just revealed what they believe are the 5 best stocks for investors to buy in August 2023… and BCE wasn’t on the list.
The online investing service they’ve run for nearly a decade, Motley Fool Stock Advisor Canada, is beating the TSX by 26 percentage points. And right now, they think there are 5 stocks that are better buys.
See the 5 Stocks
* Returns as of 8/16/23
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Fool contributor Daniel Da Costa has positions in BCE and Freehold Royalties. The Motley Fool recommends Freehold Royalties. The Motley Fool has a disclosure policy.