Top Pick Tuesday: 2 Oversold Stocks Now Yielding 6%

Russel Metals Inc. (TSX:RUS) and another reliable dividend pick might be too cheap to ignore.

| More on:

Dividends often represent a significant part of the return investors get from their holdings in equity markets.

Once in a while, good companies get oversold, and the following high-yield stocks might be interesting picks today for a self-directed income portfolio.

Enbridge

Enbridge (TSX:ENB)(NYSE:ENB) is a giant in the North American energy infrastructure industry with pipelines transporting a significant part of the oil, natural gas, and natural gas liquids produced in Canada and the United States. Enbridge also has businesses that distribute natural gas to companies and households.

Getting major new pipelines built is not easy these days, and some people say the improvements in batteries are getting to the point where combustion engines will soon be eliminated, replacing the need for diesel fuel and gasoline. The trend is definitely moving in that direction in some countries, but overall oil demand continues to increase, and natural gas still has a future as a source of power generation and as a fuel to help people heat their homes and cook their food.

Enbridge gets most of its revenue from regulated assets, and anticipated growth in distributable free cash flow is a solid 5-7% per year over the medium term. The company can self-fund its $16 billion development program and has streamlined its corporate structure.

The stock appears oversold today, and investors who buy now can pick up a 6.35% yield.

Russel Metals

Russel Metals (TSX:RUS) is one of North America’s largest metals distribution companies with energy products, service centres, and steel distribution operations.

Tariffs have made an already complicated industry even harder to navigate, but Russel Metals does a good job of adjusting to the volatility and continues to deliver solid results.

The company generated Q1 2019 net income of $34 million compared to $38 million in the same quarter last year and free cash flow of $58 million compared to $60 million.

The company has a strong track record of maintaining the dividend when the cycle is at a low point, and the current quarterly payout of $0.38 per share should be safe.

The stock is down to a level where upside could be significant on a shift in market sentiment. Russel Metals trades at $22 per share compared to $30 last August. Investors who buy today can pick up a yield of 6.9%.

The bottom line

Enbridge and Russel Metals pays attractive and reliable dividends. The stocks appear oversold right now and have the potential to deliver big gains for patient investors.

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.

The Motley Fool owns shares of Enbridge. Fool contributor Andrew Walker owns shares of Enbridge. Enbridge is a recommendation of Stock Advisor Canada.

More on Dividend Stocks

Make a choice, path to success, sign
Dividend Stocks

Is Fortis Stock a Buy for its Dividend Yield?

Fortis has increased the dividend for 51 consecutive years.

Read more »

Middle aged man drinks coffee
Dividend Stocks

Is Brookfield Stock a Buy, Sell, or Hold for 2025?

BAM stock recently jumped after beating earnings. But is it still a buy, or is it better to wait?

Read more »

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

3 Top Canadian Utility Stocks to Buy in November

Are you looking for some top Canadian utility stocks to own? Here's a look at three must-have options for any…

Read more »

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

Is First Capital REIT a Buy for its 4.8% Yield?

First Capital is a REIT that offers you a tasty dividend yield of 4.8%. Is this TSX dividend stock a…

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

TFSA Passive Income: 3 Stocks to Buy and Never Sell

Stocks like Fortis Inc (TSX:FTS) are worth holding long term.

Read more »

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

Canadian Utility Stocks to Buy Now for Stable Returns

Given their regulated business, falling interest rates, and healthy growth prospects, these three Canadian utility stocks are ideal for earning…

Read more »

nuclear power plant
Dividend Stocks

The Best Canadian Stocks to Buy and Hold Forever in a TFSA

TFSA investors can buy and hold these Canadian stocks to generate above-average, tax-free returns over the next decade.

Read more »

Person holding a smartphone with a stock chart on screen
Dividend Stocks

Is Telus Stock a Buy for its 7.3% Dividend Yield?

Although the 7.3% dividend yield Telus offers is attractive, it's just one of many reasons why the telecom stock is…

Read more »