3 TSX Dividend Stocks With Payout Ratios That Actually Hold Up to Scrutiny

Last year, BCE Inc (TSX:BCE) investors had a rude awakening when they read the earnings release for the fourth quarter of 2024. In the release, the company said that it had been forced to cut its dividend from $0.99 to $0.49, owing to a negative economic outlook. The stock plunged after the news came out.

While BCE’s press release used phrases like “unsupportive policy environment” and “global recession fears” to justify the dividend cut, the reality was that the dividend payouts had simply gotten too expensive. Paying out more in dividends than it earned in profits, BCE did what it would have had to sooner or later.

BCE Inc’s 2025 dividend cut reveals the perils of high yield investing. Too often, a high yield today transforms into a low yield and a plunging stock price tomorrow. Nevertheless, there are responsible companies out there paying dividends that are both high and well supported by earnings. In this article, I’ll explore three of them.

Rogers Communications

Rogers Communications Inc (TSX:RCI.B) is a Canadian telco stock with an admirably low 13.2% payout ratio. This ratio comes from the fact that the company paid out $913 million in dividends last year on $6.9 billion in earnings. Despite the low payout ratio, RCI.B actually has a fairly high dividend yield: 4.2%. When a stock has a low payout ratio and a high yield simultaneously, that it is a good sign that it is cheap in fundamental terms.

Indeed, RCI.B does appear to be a cheap stock, going by valuation multiples. At Monday’s closing price, the stock traded at 9.5 times earnings, 1.2 times sales, 1.5 times book, 4 times operating cash flow, and 12.4 times free cash flow (FCF). These multiples are far below average for the TSX as a whole. They also compare favourably to Rogers’ competitors BCE and Telus.

Why is Rogers stock so cheap? Most likely, because of the sector-wide issues in Canadian telcos as a whole. As mentioned previously, BCE has been cutting its dividend. Also, these companies are not growing their earnings very much. Nevertheless, a cheap enough stock can be worth it without growth: RCI.B seems to fit that description.

TD Bank

The Toronto-Dominion Bank (TSX:TD) is a Canadian bank stock with a 3.2% dividend yield. Early last year, the yield was approaching 6%, but it got smaller after a large increase in the stock price. Despite the higher price and lower yield, TD is probably a half-reasonable hold today. The company is growing both its revenue and earnings at commendable paces, contrary to predictions that it would not be able to after having its U.S. retail assets capped by the U.S. Department of Justice (DoJ). Despite the growth, it still trades at a “decent” 15 times adjusted earnings and 1.9 times book – lower than the North American market averages. Personally, I’m very comfortable holding TD even after its massive 2025 rally.

Fortis

Last but not least we have Fortis Inc (TSX:FTS). This is a Canadian utility stock with a 3.3% dividend yield and a 73% payout ratio. A payout of 73% is much higher than the other two stocks’ payout ratios, but it is relatively low for a utility stock. Utilities are well known for pushing it with their dividend payouts, in many cases paying out well over 100% of what they earn. This in some cases results in dividend cuts, as we saw at Algonquin Power & Utilities Corp (TSX:AQN) a few years back. Fortis usually maintains its dividend payouts within reason, and that helps it run a much smoother ship than the average TSX utility stock. Over long periods of time, it also results in superior total returns.

The post 3 TSX Dividend Stocks With Payout Ratios That Actually Hold Up to Scrutiny appeared first on The Motley Fool Canada.

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More reading

• 3 Stocks I’d Buy Today and Hold Comfortably All the Way to 2031
• 2026 Outlook for TD Stock
• One Canadian Dividend Stock Built to Hold in Any Market
• 2 Canadian Stocks That Look Ready to Break Out This Year
• 5 TSX Dividend Stocks Worth HoldingThrough the Next 10 Years

Fool contributor Andrew Button has positions in TD Bank. The Motley Fool recommends Fortis, Rogers Communications, and TELUS. The Motley Fool has a disclosure policy.