Top 10 Canadian High Yield Stocks – June 2019

Top High Yield Stocks

Are you looking for income with high yield stocks? While the highest yield isn’t always the best investment, it’s a good place to start looking for income.

Based on stock prices which can move up or down depending on company news and performance, the list will change. As such, the opportunities will vary every month and that’s why it’s important to have a systematic approach to understanding which high yield stocks are an opportunity.

An opportunity can be for a stock you already own or simply for a new addition to your portfolio. It is important to note that the rankings below do not assess the viability of the business.

Top 10 Canadian High Yield Dividend Stocks

This month’s results are a snapshot in time at the time of writing and many factors could change the rankings. It’s important to be aware that a high yield stock can either be a good income source or a warning sign for the dividend.

Do look further into their payout strategy and history before committing to a high yield stock to avoid unnecessary risks on your portfolio. If high yield is necessary, look at the Canadian Financial ETFs, they also pay a sustainable high yield.

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Chemtrade Logistic

CHE.UN - Chemtrade LogisticsChemtrade is a leading global provider of industrial chemicals and services. Chemtrade provides industrial chemicals and services primarily in North America and worldwide. It also provides industrial services such as processing by-products and waste streams. It is one of North America’s largest suppliers of sulfuric acid and inorganic coagulants for water treatment. The company is known for its reliable products and global distribution channels. Chemtrade’s business segments are sulphur products and performance chemicals (SPPC - 34% of Q3’18 revenues), water solutions and specialty chemicals (WSSC - 27%), and electrochemical (39%). The company enjoys significant market shares in niche specialty chemicals. A diversified product portfolio and large geographic footprint are the company’s strengths and mitigate commodity risks. Chemtrade has a long history of acquisitions and successful integrations which has resulted in a more resilient business. Its SPPC business derives 60% of revenue from risk shared contracts, while its WSSC business segment includes specialty chemicals with distinct barriers to entry.

Investment Data

Vermillion Energy

Vermilion Energy is an international oil and gas producer focusing on acquiring and developing producing properties in North America, Europe, and Australia. Canada is its largest region accounting for nearly 60% of total production, followed by France, Australia, Ireland, USA, the Netherlands, and Germany. The company concentrates on crude oil and condensate, NGLs and natural gas with an emerging focus on renewable energy projects. Vermillion’s global asset portfolio provides commodity diversification and premium pricing. Its assets are characterized by high margins, low base production decline rates, and strong capital efficiencies. Conventional projects and additional growth opportunities in unconventional resource plays are key competitive advantages for Vermillion Energy. The company has both onshore and offshore operations in stable and developed economies, having clear regulatory policies for oil and gas exploration and development.

Investment Data

Ensign Energy Services

ESI - Ensign Energy ServicesEnsign Energy Services is a global enterprise that provides a unique edge in oilfield service. We are defined by our inspired thinking; our innovative use of technology; our confident, dedicated, well-trained workforce; and our culture of achievement. We are built to serve. We deliver a superior customer experience and trusted, reliable performance.

We are among the world’s strongest, fastest-growing energy services companies. Ensign is equipped with industry leading technology and empowered by a culture of innovation and action. Our employees across the globe are united in a commitment to service. We are able to deliver safety and excellence to our customers where they need us, when they need us.

Investment Data

Alaris Royalty Corp

AD - Alaris RoyaltyAlaris is a Canadian company providing preferred equity financing to private businesses across North America. The company uses a unique structure to service a niche in the private capital markets. About 91% of Alaris’ investment is in U.S. based companies and the balance is in Canadian companies. Alaris focuses on diversified industries such as business, professional, information and healthcare services, distribution and logistics, industrials and consumer products. By industry, 58% of its investments are in business services, 35% in industrials, and 7% in consumer products and services. Alaris chooses to partner with companies having steady cash flows, proven management teams and are not very capital intensive. Its interest in the partner companies could be in the form of a preferred partnership interest, equity interest, loan, or ownership of intellectual property. The company provides cash financing to partners in exchange for a predetermined distribution.

Investment Data

Arc Resources

ARC Resources is a leading conventional oil and gas company in Canada with a production capacity of over 139,000 boe/day. The company has a huge asset base in western Canada, with operations in the Montney region in Alberta and northeast British Columbia, and the Pembina Cardium region in Alberta. ARC Resources has a high quality portfolio of diversified assets with a huge potential to grow. More than 50% of ARC’s revenues are derived from crude oil and liquids production. The company is targeting to grow liquids production through multi-year development projects. ARC is making good progress on multiple large scale projects which should convert into cash flow growth and long term value creation. It is selling off non-core assets for portfolio optimization and is focusing on cost control to drive better efficiencies. ARC Resources is entering into firm pipeline transportation agreements and is diversifying into consuming regions to support its existing production and reduce volatility risk.

Investment Data

Inter Pipeline Limited

IPL - InterPipelineInter Pipeline is an integrated energy infrastructure company in Canada that engages in the transportation and storage of petroleum, and natural gas liquids processing. Inter Pipeline operates four business segments namely oil sands transportation (48% of 2018 earnings), NGL processing (34%), conventional oil pipelines (13%) and bulk liquid storage (5%). The company operates through an extensive network of pipeline systems spanning over 7,800 kilometers and transports over 1.4 million barrels per day. In addition, the company also owns petroleum and petrochemical storage terminals with a combined storage capacity of 37 million barrels across Europe. It operates one of the largest NGL businesses in Canada with a processing capacity of 3.5 bcf/d in 2018. Canada is its principal place of business accounting for 95% of its earnings while the remaining 5% is from Europe. Ownership of world-scale energy infrastructure assets in strategic locations, stable and diversified FFO are strong competitive advantages for Inter Pipeline.

Investment Data

Freehold Royalties

Freehold Royalties is an oil and gas royalty company with assets predominantly in western Canada. The company receives oil and natural gas revenue from approximately 300 industry operators with royalty rates varying from less than 1% to 22.5%. The royalty volumes are weighted nearly 55% oil and natural gas liquids (NGL) and 45% natural gas. Freehold does not incur any capital costs to drill or equip the wells for production. Its land holdings total more than 6.4 million gross acres, which is one of the largest independently owned royalty lands portfolios in Canada. The company continues to add low decline, growth assets to its portfolio at a fast pace. Freehold owns a diverse portfolio of properties in western Canada. Its royalties as a percentage of production have remained above 95%. About 10% of industry drilling within western Canada is on Freehold land. Given its strong reputation, the company can conveniently create new leases on its royalty lands.

Investment Data

Cineplex

CGX - CineplexCineplex is a leading diversified entertainment and media company in Canada. It is Canada’s largest film exhibitor running 165 theatres and 1692 screens across the country. Cineplex’s operations are primarily conducted through three reportable segments: film entertainment and content (76% of revenues), media (11%), and amusement and leisure (13%). Theatre exhibition is the core business of Cineplex. Cineplex entertains more than 70 million guests annually through its network of theatres and entertainment centers across the country. In addition, it operates digital commerce, food service, alternative programming, digital place-based media, amusement solutions, and an online esports platform. Cineplex’s core media strengths and infrastructure are its biggest competitive advantages. Box office revenues account for the largest portion of Cineplex’s revenues. The company continues to introduce tailored entertainment experiences for communities across the country.

Investment Data

Dorel Industries

DII.B Dorel IndustriesDorel Industries is a leading global company dealing in juvenile and home products, and bicycles. It ranks amongst the top five furniture manufacturers in North America. The company has a worldwide marketing and distribution network and manufacturing operations across 25 countries. Dorel engages in designing and manufacturing of a wide range of products such as infant car seats, strollers, high chairs, swings, bicycles, electric bikes, children’s electric ride-on, and furniture, etc. It also imports finished goods from overseas suppliers. Dorel operates through three business segments, Dorel Juvenile (35% of 2018 revenue), Dorel Sports (34%) and Dorel Home (31%). Some of its well-known brands include Maxi-Cosi, Quinny, Tiny Love, Cannondale, Schwinn, GT, Mongoose, etc. The company is trusted by customers worldwide for its strong reputation for providing safe, comfortable, and innovative products. Dorel’s customers include major retail chain stores and e-commerce merchants such as Walmart and Amazon.

Investment Data

Russel Metals

RUS - Russel MetalsRussel Metals is one of the North America's biggest metal distributors and processors. The company is one of key distributor of metal products such as aluminium, stainless steel, carbon hot rolled and cold finished steel, pipe and tubular products as well as different types of non-ferrous specialty metals. Russel Metals gets 35% of its revenues from the US with the remaining 65% of the sales comes from the Canadian market. The key business segments of the company are energy products( 38% of revenues) , metal service centers (51% of revenues) and steel distributors (11% of revenues). In terms of products, valves, fittings, pipe products and plates account for the lion’s share of the company’s sales. The company has a large distribution network of 51 Canadian and 12 US centres which help supply 28,000 customers. Russel Metals provides processing and distribution services to consumers in a diverse set of industries such as shipbuilding, equipment manufacturing, construction, shipbuilding, as well as mining and petroleum. Its well spread out network is strategically located to service customers in key Canadian and US energy markets.

Investment Data
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Methodology

The top 10 high yield stocks identified are based on the highest yield of dividend stocks excluding REITs within the Canadian Dividend Performance List covering over 120 of the top Canadian stocks. For a REIT list, se the Canadian REIT list.

Please note that generating income with a high yield is a great short-term reward but it’s not without risks. Either a dividend cut is imminent or growth is limited. Make sure you look for the right stock for your portfolio and that you really understand the business you are investing in. I like to look at the Chowder Score to assess growth for both the stock appreciation and the dividend.

If you are interested in more details, the Canadian Dividend Performance List provides many more data points to help make your investment decision.

DISCLOSURE: Please note that I may have a position in one or many of the holdings listed. For a complete list of my holdings, please see my Dividend Portfolio.

DISCLAIMER: Please note that this blog post represents my opinion and not an advice/recommendation. I am not a financial adviser, I am not qualified to give financial advice. Before you buy any stocks/funds consult with a qualified financial planner. Make your investment decisions at your own risk – see my full disclaimer for more details.
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