RNW:CC - TFSA Investors: 3 Rock-Solid Dividend Payers Yielding up to 13.5%

2023-07-06 13:45:00 ET

Canadians can use the TFSA, or Tax-Free Savings Account , to create a passive stream of tax-free dividend income. These dividends can either be reinvested to benefit from higher payouts in the future or can be withdrawn and invested in other companies, diversifying your portfolio and lowering overall risk.

Here are three rock-solid dividend payers yielding up to 9% in 2023.

Fiera Capital stock

A company that operates in the asset management space, Fiera Capital ( TSX:FSZ ) offers shareholders a tasty dividend yield of 13.5%. The beaten-down TSX stock is currently down 58% from all-time highs, increasing its forward yield significantly.

The performance of Fiera Capital stock is tied to the broader financial markets. It generates a significant portion of revenue from performance fees and commissions, which, in turn, depend on assets under management, or AUM.

When market sentiment turns bearish, investors pull out funds lowering AUM by a wide margin. So, if you expect markets to recover in the near term, investing in Fiera Capital is a good bet today.

Priced at 6.5 times forward earnings, FSZ stock is very cheap, and it trades at a discount of 23% to consensus price target estimates.

However, investors should also understand that if the company’s financials deteriorate, Fiera Capital will be forced to roll back or even suspend its dividend payments.

TransAlta Renewables stock

A TSX stock that provides you exposure to the clean energy space, TransAlta Renewables ( TSX:RNW ) pays shareholders an annual dividend of $0.94 per share, indicating a forward yield of 8.4%.

TransAlta Renewables has increased or maintained dividends each year for the last nine years. It owns a portfolio of cash-generating 50 clean energy facilities powered by solar, wind, hydro, and natural gas.

It is the largest generator of wind energy in Canada, offering it an economic moat and a certain competitive advantage. With a payout ratio of less than 70%, the company’s dividend yield is sustainable.

RNW stock is priced at 16.4 times forward earnings, which is not too expensive as its forecast to increase earnings by 24% annually in the next five years. The TSX stock also trades at a discount of 20% to consensus price target estimates.

TC Energy stock

The final high dividend stock on my list is TC Energy ( TSX:TRP ), which offers a dividend yield of almost 7%. A diversified energy infrastructure company, TC Energy’s robust financial profile has allowed it to increase dividends for 23 consecutive years. These dividends are now forecast to grow between 3% and 5% annually in the foreseeable future.

TC Energy’s cash flows are backed by long-term contracts, which are indexed to inflation, resulting in predictable earnings even when oil prices are low. It now expects to maintain a payout ratio of below 50%, providing the energy giant with enough room to reinvest in growth projects and lower its leverage.

Priced at 12.4 times forward earnings , TC Energy stock is trading at a discount of 15% to consensus price target estimates.

The Foolish takeaway

Investing $5,000 in each of these stocks can help you earn $1,420 in annual dividends. If these companies increase dividends by 5% annually, your payout could double in 14 years.

The post TFSA Investors: 3 Rock-Solid Dividend Payers Yielding up to 13.5% appeared first on The Motley Fool Canada .

Fool contributor Aditya Raghunath has positions in TransAlta Renewables. The Motley Fool recommends Fiera Capital. The Motley Fool has a disclosure policy .

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