3 Oversold Dividend-Growth Stocks for Your TFSA Income Portfolio

Here’s why Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) and another two unloved stocks deserve to be on your radar today.

| More on:

Income investors are finally getting a chance to pick up some high-yield dividend-growth names at attractive prices.

Let’s take a look Inter Pipeline Ltd. (TSX:IPL), Altagas Ltd. (TSX:ALA), and Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) to see why they might be interesting buys today.

IPL

IPL took advantage of the oil rout to add strategic assets at attractive prices, including a $1.35 billion deal to acquire two natural gas liquids (NGL) extraction facilities and related infrastructure from The Williams Companies.

The purchase was made at a significant discount to the cost of building the plants, so IPL could see nice returns on the investment in the coming years as the market recovers.

In addition, the deal came with plans for a new development, and IPL recently gave the $3.5 billion Heartland Petrochemical Complex the green light. Management says the facility should be completed by the end of 2021 and is expected to generate long-term additional EBITDA of $450-500 million per year.

The company raised the dividend late last year, and investors currently pick up a 7.3% yield.

Altagas

Altagas owns power, gas, and utility businesses in Canada and the United States. Growth has come from a combination of organic developments and strategic acquisitions, and that trend continues.

The company completed two projects in British Columbia near the end of 2017 and is making good progress on its Ridley Island propane export terminal in the province. South of the border, Altagas is also working through its $8.4 billion acquisition of WGL Holdings. The deal should close this year, and management is targeting 8% annual dividend growth through 2021 once the purchase is complete.

The market is concerned Altagas is in over its head with the WGL purchase. Time will tell, but the existing assets are performing well, and Altagas raised the dividend by 4% last fall. At the time of writing, the stock provides a yield of 9%.

CIBC

CIBC is widely viewed as the riskiest of the big Canadian banks due to its heavy exposure to the Canadian residential mortgage market. It’s true that rising interest rates could force some homeowners to sell their properties, and a domino effect would put downward pressure on house prices.

That said, most analysts don’t expect to see a total meltdown in the Canadian housing market, and CIBC’s mortgage portfolio is capable of riding out a rough patch.

The company made a series of acquisitions in the United States in the past year to help diversify the revenue stream, and investors could see the trend continue in the coming years.

With a price-to-earnings ratio of less than 10.5 times trailing earnings, CIBC looks pretty cheap, despite the perceived risks. The company has a strong track record of dividend growth, and the payout should be very safe, even if things get ugly in the Canadian housing market.

At the time of writing, CIBC provides a 4.8% yield.

The bottom line

Buying high-yield stocks when they are out of favour takes some courage, and contrarian picks don’t always work out. However, these three names appear to be oversold right now, and while more volatility could be on the way, the distributions look solid, and you are paid well to wait for better days.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Andrew Walker owns shares of Altagas. Altagas is a recommendation of Stock Advisor Canada.

More on Dividend Stocks

A worker drinks out of a mug in an office.
Dividend Stocks

Is Brookfield Infrastructure Partners a Buy for its 4.75% Yield?

Brookfield Infrastructure Partners (BIP) has a 4.75% dividend yield. Is it worth it?

Read more »

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.
Dividend Stocks

Where to Invest Your $7,000 TFSA Contribution

The TFSA is attractive for investors who want to generate tax-free passive income.

Read more »

The TFSA is a powerful savings vehicle for Canadians who are saving for retirement.
Dividend Stocks

TFSA Investors: 3 Dividend Stocks Worth Holding Forever

These TSX stocks have the potential to grow their dividends over the next decade, making them top investments for TFSA…

Read more »

Tractor spraying a field of wheat
Dividend Stocks

Is Nutrien Stock a Buy for its Dividend Yield?

Nutrien is down more than 50% form the 2022 highs. Is NTR stock now oversold?

Read more »

golden sunset in crude oil refinery with pipeline system
Dividend Stocks

Best Stock to Buy Right Now: Enbridge vs TC Energy?

Enbridge and TC Energy rebounded nicely over the past year. Are more gains on the way?

Read more »

Electricity transmission towers with orange glowing wires against night sky
Dividend Stocks

2 Utility Stocks That Are Smart Buys for Canadians in November

Are you looking for some of the smart buys to consider in November? These utility stocks offer growth and a…

Read more »

View of high rise corporate buildings in the financial district of Toronto, Canada
Dividend Stocks

Is Power Corporation of Canada Stock a Buy for its 5% Dividend Yield?

Is Power Corporation of Canada (TSX:POW) stock's 5% dividend yield worth it? Discover why this resilient stock could be a…

Read more »

hand stacks coins
Dividend Stocks

Here Are My Top 3 Dividend Stocks to Buy Now

These three dividend stocks are ideal for strengthening your portfolio and earning a stable passive income.

Read more »