2 Small-Cap Dividend Stocks for Young Investors to Feed Off

Freehold Royalties Ltd. (TSX:FRU) and Evertz Technologies Limited (TSX:ET) offer young investors solid dividend yields of 5.95% and 4.83%, respectively, as well as strong potential capital appreciation.

| More on:
The Motley Fool

As a young investor, you have time on your side — time to allow for the compounding of returns to work its magic and to allow your stocks to grow as strategies take shape and take your companies to the next level.

Here are two stocks dividend stocks that are undervalued and have bright futures ahead of them for young investors.

Evertz Technologies (TSX:ET)

Evertz designs, manufactures, and markets video and audio infrastructure solutions for television, telecommunications, and new media industries. This is an industry that is experiencing rapid change, and Evertz is well positioned to benefit from these changes.

This dividend stock, currently yielding a hefty 4.83%, is clearly cheap, trading at 15 times this year’s expected EPS.

This is at a time when growth rates are accelerating, proof of which we can see in the company’s strong shipments and backlog numbers, which totaled $122 million in the latest quarter (first quarter of fiscal 2019). Importantly, this number is significantly above historic levels of below $100 million.

This little-known stock offers investors a strong dividend yield that it supported by strong cash flows and a strong balance sheet.

In the past, the company has chosen to return excess cash to its shareholders in the form of a special dividend. In fiscal 2017, Evertz paid dividends totaling $137.5 million, $83.2 million of which was in the form of a special dividend.

With a regular annual dividend of $0.72 per share, the possibility of more special dividends and/or an acquisition in the future as the company aims to make use of its strong cash flows and balance sheet, and an attractive valuation (15 times this year’s expected earnings), the stock is a great addition to young investors’ portfolios for growth and yield.

Freehold Royalties (TSX:FRU)

Freehold stock is an energy stock that is also a dividend stock, and it is trading at bargain prices these days.

While the price of WTI oil has been strong, Freehold stock has declined 29% in the last year — a reflection of weak Canadian oil prices due to infrastructure limitations — a condition that has not stopped Freehold from making tonnes of cash.

In the first quarter of 2018, company generated $0.27 in cash flow per share and a 10% free cash flow yield.

Freehold Royalties stock offers investors a relatively low-risk way to play the energy space, with a 5.95% dividend yield, a well-diversified asset base, and a low-risk business model with relatively predictable cash flows and a strong balance sheet.

This company has a long history of value creation. Long-term shareholders have done very well with Freehold.

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 Karen Thomas has no position in any of the stocks mentioned. Freehold Royalties is a recommendation of Stock Advisor Canada.

More on Dividend Stocks

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 »

man touches brain to show a good idea
Dividend Stocks

3 No-Brainer REIT Stocks to Buy Right Now for Less Than $200

REITs have long been touted as some of the best dividend stocks out there if you want recurring, strong income.…

Read more »