Top Canadian Dividend Stocks Yielding Over 7% in October 2023

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Investors cannot care less about changes in stock prices when they focus more on getting returns from dividend income. Here are a couple of top stocks offering big dividends that Canadians can take a closer look at to see if they make sense for their long-term diversified portfolios.


I’m not going to downplay the challenges the bank is facing. Higher interest rates are leading to slower economic growth. It’s harder for businesses and individuals to take out new loans, and it’ll be costlier to refinance loans, such as when it comes time to renew a mortgage.

Like its peers, Canadian Imperial Bank of Commerce (TSX:CM) is anticipating higher loan loss provisions. For example, in the first three quarters of the fiscal year, CIBC’s loan loss provisions jumped 137% year over year to $1.5 billion, dragging down its adjusted earnings per share by about 9% to $5.15.

As a result of a negative economic outlook, the Canadian bank stock has declined approximately 21% over the last 12 months. At $47.84 per share at writing, it offers a boosted dividend yield of 7.26%. Assuming a normalization of the economy over the next three to five years, CIBC stock could return to about $69 for upside potential of approximately 44%.

CIBC’s payout ratio is estimated to rise to about 66% of earnings this fiscal year. Although it’s undesirable to see the payout ratio higher than the normal range of about 50%, it still remains sustainable.

SmartCentres REIT

Higher interest rates also don’t bode well for real estate investment trusts (REITs) that tend to have sizeable debt in the form of mortgages on their balance sheets. This is why SmartCentres REIT (TSX:SRU.UN) has corrected almost 22% over the last 12 months. The quality Canadian retail REIT last traded at this level in 2020 during the pandemic.

SmartCentres’s retail real estate portfolio is comprised of 189 properties in key intersections across Canada, including 114 centres that are anchored by Walmart, which should help drive foot traffic to its properties. The REIT has maintained or increased its cash distribution every year since at least 2007. So, it appears to be committed to its monthly cash distribution.

The REIT last reported its second-quarter results in August, at which time it had an industry-leading occupancy rate of about 98.2%. Year over year, its funds from operations (FFO) and net operating income (NOI) were 8.3% and 10.5% higher, respectively. Its FFO payout ratio in the first half of the year was about 84%. However, based on the adjusted FFO with adjustments, the payout ratio was 97.5%. Ideally, investors would like to see a bigger margin of safety for the payout ratio.

At $21.27 per unit, the retail REIT is ripe for a rich cash distribution yield of close to 8.7%. When interest rates decline, the stock could make a comeback. Currently, Yahoo Finance indicates that the 12-month analyst consensus price target of $28.69 represents upside potential of almost 35%.

Investor takeaway

In a higher interest rate environment with heightened economic risk, the bank and REIT stock valuations have come down. It is scarier to invest in this type of market. However, if you have a long-term view and can wait for when interest rates come down (which could take a recession for the Bank of Canada to decide to do this), it is a good opportunity to explore dividend stocks for higher yields and more income.

The post Top Canadian Dividend Stocks Yielding Over 7% in October 2023 appeared first on The Motley Fool Canada.

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Our market-beating analyst team just revealed what they believe are the 5 best stocks for investors to buy in October 2023… and CIBC wasn’t on the list.

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See the 5 Stocks
* Returns as of 10/10/23

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Fool contributor Kay Ng has positions in Canadian Imperial Bank of Commerce. The Motley Fool recommends SmartCentres Real Estate Investment Trust and Walmart. The Motley Fool has a disclosure policy.