2 TSX Dividend Stocks Yielding More Than 8%

After the recent market crash many high-quality TSX dividend stocks not only trade extremely undervalue, but also offer major dividend yields.

| More on:

After this week’s three-day rally, it appears that a lot of confidence has returned to the markets. Despite that major gains through the week, however, a lot of TSX dividend stocks still remain extremely attractive.

And because these companies are cheap, their dividends are yielding massive figures that will be extremely rewarding for long-term shareholders for years.

There is no telling what may happen in the short term, and these companies could very well be sold off again over the next few weeks, creating even higher dividends.

That shouldn’t matter however, because some of these stocks are so cheap, you should be buying them today.

Two of the top TSX dividend stocks that currently yield more than 8% are Pembina Pipeline Corp (TSX:PPL)(NYSE:PBA) and AltaGas Ltd (TSX:ALA).

Energy dividend stock

Pembina Pipeline is an energy infrastructure company that is one of the top TSX dividend stocks you can buy today.

The stock was sold off rapidly to start the month out of nothing but pure fear. Investors who acted quickly and were confident in the company they were buying have already been rewarded.

The stock gained back a lot of its losses during this past week’s rally. However as of midday Friday, the stock is down more than 10% again, trading a little over $25.

At these prices its stable and reliable dividend yields just under 10%. That dividend is expected to payout just 60% of its 2020 adjusted funds from operations (AFFO), so the dividend should remain safe.

Furthermore, less than a fifth of Pembina’s business is exposed to commodity prices, so the company should easily be able to weather this storm.

The stock currently trades at just 11 times its trailing earnings, which is extremely cheap for such a high-quality company like Pembina.

Analysts tend to agree. Looking only at those who have reiterated their target prices in the last two weeks, Pembina still has an average target price of $41.

The combination of capital gains potential and a massive dividend yield combine to make Pembina one of the most attractive dividend stocks on the TSX today.

Utility dividend stock

AltaGas is another top TSX dividend stock that’s still offering an attractive yield. The stock is down nearly 50% from its highs, offering investors a major opportunity to capitalize on this value.

The business has likely been sold off as investors worry about AltaGas’ commodity exposure and its sizeable debt load.

Debt was an issue only a few years ago for AltaGas, although management handled that issue relatively well. The company sold off a number of non-core assets to pay down debt and also improved the profitability of its core assets. This improved its debt-to-income ratios considerably.

In addition, the worry surrounding AltaGas’ commodity exposure is understandable but a little overblown. Similar to Pembina, less than a fifth of its business is exposed to commodity prices. Furthermore, more than half of its revenue comes from regulated natural gas distribution.

As of midday Friday, the stock was trading around $12 a share. At that price, its dividend yields a whopping 8%. And the most attractive part, that dividend has an expected 2020 payout ratio of just 80%. In terms of AFFO, that payout ratio is just 32%, so it’s highly stable.

At just $12 a share and an 8% dividend, AltaGas is one of the top dividend stocks on the TSX and is trading at unbelievably cheap levels.

Bottom line

For investors who are still looking, there are still plenty of high-quality TSX dividend stocks out there trading undervalue.

Not only will a lot of these stocks offer an attractive yield, but they will also offer considerable capital gains potential. In addition, if the businesses are high-quality, the growth they provide for years could make them one of the best investments you ever make.

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 Daniel Da Costa has no position in any of the stocks mentioned. The Motley Fool recommends ALTAGAS LTD. and PEMBINA PIPELINE CORPORATION.

More on Dividend Stocks

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

TFSA Contribution Limit Stays at $7,000 for 2025: What to Buy?

This TFSA strategy can boost yield and reduce risk.

Read more »

Make a choice, path to success, sign
Dividend Stocks

Already a TFSA Millionaire? Watch Out for These CRA Traps

TFSA millionaires are mindful of CRA traps to avoid paying unnecessary taxes and penalties.

Read more »

Canada Day fireworks over two Adirondack chairs on the wooden dock in Ontario, Canada
Tech Stocks

Best Tech Stocks for Canadian Investors in the New Year

Three tech stocks are the best options for Canadians investing in the high-growth sector.

Read more »

Happy golf player walks the course
Dividend Stocks

Got $7,000? 5 Blue-Chip Stocks to Buy and Hold Forever

These blue-chip stocks are reliable options for investors seeking steady capital gains and attractive returns through dividends.

Read more »

Concept of multiple streams of income
Stocks for Beginners

The Smartest Dividend Stocks to Buy With $500 Right Now

The market is flush with great opportunities right now, and that includes some of the smartest dividend stocks every portfolio…

Read more »

Hourglass projecting a dollar sign as shadow
Dividend Stocks

It’s Time to Buy: 1 Oversold TSX Stock Poised for a Comeback

An oversold TSX stock in a top-performing sector is well-positioned to stage a comeback in 2025.

Read more »

woman looks at iPhone
Dividend Stocks

Where Will BCE Stock Be in 5 Years? 

BCE stock has more than halved in almost three years. Where will the stock be in the next five years?…

Read more »

Piggy bank with word TFSA for tax-free savings accounts.
Dividend Stocks

Take Full Advantage of Your TFSA: Income-Generating Ideas for 2025

These TSX stocks pay attractive dividends.

Read more »