With rates of interest shifting decrease during the last two years, buyers are trying in the direction of high-yield dividend shares to create a low-cost passive earnings stream. Whereas firms that supply a excessive dividend payout may appear engaging at first look, it’s essential to research whether or not these payouts are protected and sustainable throughout enterprise cycles.
On this article, I’ve recognized one such TSX inventory that gives you a dividend yield of over 8%.
Is that this TSX dividend inventory purchase?
KP Tissue (TSX:KPT) is a Canadian tissue paper producer that produces, distributes, and sells disposable tissue merchandise in Canada and the US. Working via Client and Away-From-House (Kruger Professional) segments, it presents rest room tissues, facial tissues, paper towels, and napkins underneath varied manufacturers together with Cashmere, Scotties, SpongeTowels, and personal labels.
In Q1 2025, KP Tissue grew its income by 14% yr over yr whereas adjusted EBITDA (earnings earlier than curiosity, tax, depreciation, and amortization) rose by 13% to $76 million, showcasing the tissue producer’s resilience amid unstable financial circumstances and commerce disruptions. KP’s client phase, that includes manufacturers like Cashmere and Scotties, drove progress with income rising 15.1% to $465.2 million.
Larger gross sales volumes in each Canada and the U.S., together with improved pricing and beneficial overseas trade impacts, powered the double-digit enhance. Canadian income grew 7.6% whereas U.S. gross sales surged 21.7% year-over-year.
The Away-From-House phase, lately rebranded as Kruger PRO, posted 7.7% income progress to $80.9 million regardless of profitability pressures from exterior paper purchases. CEO Dino Bianco famous that buyer discussions on this phase have centered closely on tariff impacts and provide chain considerations, creating market noise that has distracted from conventional progress planning.
Rising in Canada
KP Tissue’s Sherbrooke enlargement mission continues to exceed expectations, with the brand new LDC paper machine and facial tissue changing line surpassing start-up projections.
Starting within the second quarter, the ability is predicted to fulfill primarily all in-house paper necessities, decreasing reliance on exterior purchases and bettering Away-From-House margins.
The corporate has strategically positioned itself to profit from rising “Made in Canada” client sentiment. All Canadian-sold manufacturers are domestically manufactured, a positioning that has change into worthwhile amid present commerce tensions.
Regardless of tariff considerations, KP Tissue estimated solely $3 million in trade-related impacts in the course of the first quarter, together with direct tariff costs and provide chain disruptions. It pre-shipped some quantity to the U.S. forward of tariff implementations, contributing to sturdy American gross sales progress.
Is that this dividend yield protected for the TSX inventory?
KP Tissue strengthened its steadiness sheet with money reaching $141.8 million and internet debt-to-EBITDA bettering to 4 occasions from 4.2 occasions within the earlier quarter. For the second quarter, administration supplied adjusted EBITDA steerage of $70—75 million, reflecting continued operational energy regardless of financial volatility.
Analysts monitoring the TSX inventory estimate its free money stream to enhance from $26.7 million in 2024 to $113 million in 2026. Over the past decade, KP Tissue has maintained its annual dividend at $0.72 per share, which interprets to a yield of over 8%.
Given its excellent share rely, KP Tissue’s annual dividend payout is lower than $8 million. So, the corporate’s payout ratio is forecast to enhance from 40% in 2024 to lower than 10% in 2026.
A widening free money stream base ought to enable the TSX dividend inventory to decrease steadiness sheet debt and even contemplate a dividend hike.
