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Dividend stocks have been on a roll. That’s the good news. The bad news? As stock prices have surged amid falling interest rates, dividend yields have gone south. That means investors looking for income are having a harder time finding juicy payouts.

Well, don’t despair. Yield Hog is here to help.

Even in today’s shrinking-yield environment, it’s still possible to find enticing payouts – without taking on undue risk. Today, we’ll look at three well-established companies that yield more than 5 per cent. What’s more, all three have a track record of raising their dividends. Barring a change in their outlook, I expect they will continue to reward investors with a growing stream of cash.

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There is no such thing as a risk-free stock, so be sure to do your own due diligence before investing in any security. To help control your risk, remember to maintain a well-diversified portfolio.

Capital Power Corp. (CPX)

Wed. closing price: $30.09

Yield: 5.9 per cent

Since I launched my model Yield Hog Dividend Growth Portfolio on Oct. 1, 2017, shares of Capital Power – an original member – have produced a total return, including dividends, of about 33 per cent. And I believe there’s more to come. In December, bolstered by investments in three contracted wind projects, the electricity producer extended its 7-per-cent annual dividend growth guidance by a year, to 2021. Then, in April, citing higher power prices in Alberta, the company projected that adjusted funds from operations (AFFO) will likely be “in the upper end” of its guidance range for 2019. Capital Power’s recent acquisition of the Goreway Power Station, a gas-fired plant in Brampton, Ont., will further contribute to AFFO and provide additional support for the dividend, which the company has increased every July for the past five years. Given Capital Power’s positive outlook, Raymond James analyst David Quezada recently raised his rating on the shares to “outperform” from “market perform” and hiked his price target to $35.50 from $31 (the average target is $33.14, according to Refinitiv). In a note to clients, Mr. Quezada cited the company’s “discounted valuation, solid slate of growth opportunities, attractive dividend yield, potential positive developments in the Alberta power market and the accretive acquisition of Goreway Power.”

SmartCentres REIT (SRU.UN)

Price: $32.90

Yield: 5.5 per cent

SmartCentres Real Estate Investment Trust offers investors the best of both worlds: A defensive portfolio of more than 160 retail shopping centres, most of which are anchored by a Walmart, and an extensive intensification and development pipeline that includes residential, office and retail opportunities. One example is the sprawling Vaughan Metropolitan Centre north of Toronto, where SmartCentres and its joint-venture partners recently announced that they had “substantially sold out” the fourth and fifth towers in their Transit City condo project. Profits from Transit City should start flowing to SmartCentres’ bottom line in 2020-21 when the “development floodgates [are] set to open,” said RBC Dominion Securities analyst Neil Downey, who rates the shares of SmartCentres “outperform." SmartCentres hasn’t escaped the turmoil in retail – it’s currently trying to re-lease 46 former Payless Shoes stores and 21 Bombay/Bowring locations after both chains went under – but the success of SmartCentres’ Toronto Premium Outlets located west of the city demonstrates that bricks-and-mortar retail can still bring in the crowds. Need money to go shopping? SmartCentres has raised its distribution for five consecutive years, with each of those increases announced in the month of August.

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CIBC (CM)

Price: $103.22

Yield: 5.4 per cent

If you believe in buying good companies when they’re down, Canadian Imperial Bank of Commerce might be worth a look. Shares of CIBC have skidded about 8 per cent since the bank announced disappointing second-quarter earnings on May 22, as results were hit by a slowdown in mortgage lending and other factors. The silver lining? The yield has risen to about 5.4 per cent from 5 per cent before the results were released. Another reason to consider CIBC is its cheap valuation: The shares trade at about 8.2 times estimated 2020 earnings. However, investors need to balance those numbers against the possibility of a severe housing slump or recession, which would be expected to pummel bank stocks. While now may prove to be a good entry point for long-term investors, keep in mind that analysts aren’t expecting a big bounce in the stock any time soon. “We like CM’s valuation, dividend yield … and execution in U.S. banking. However, we fail to see a catalyst that would drive its stock to outperform peers over the next year,” Desjardins Securities analyst Doug Young said in a note in which he dropped his rating on CIBC to hold from buy. Thanks to the rich dividend yield, however, investors get paid to wait for the stock to recover.

Disclosure: The author owns CPX, SRU.UN and CM personally and holds CPX and CM in his model Yield Hog Dividend Growth Portfolio. View it at tgam.ca/dividendportfolio.

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