The 3 Best Cheap Dividend Stocks

These dividend stocks are trading cheap and offer high and reliable dividend yields.

With interest rates at a record low, dividend stocks are one of the best investment avenues to generate a steady and safe yield. While plenty of Canadian companies pay dividends, we’ll focus on three stocks that are trading cheap and offer high and reliable dividend yields. 

Scotiabank

Scotiabank (TSX:BNS)(NYSE:BNS) has consistently grown its earnings at a healthy pace, which has led this bank to enhance its shareholders’ returns through higher dividend payments. Scotiabank’s earnings per share have grown at a CAGR of 7% since 2010. Meanwhile, its dividends have a CAGR of 6% during the same period. 

Looking ahead, I expect Scotiabank’s earnings to continue to benefit from its diversified exposure to high-quality growth markets, which will likely drive its dividends higher. Moreover, its growing scale and market share gains augur well for growth. Scotiabank’s earnings are also expected to benefit from its solid credit quality, lower provisions, and operating efficiency. 

Scotiabank stock has recovered sharply over the past year and a half. However, it is still trading cheap compared to its peers. It’s worth noting that Scotiabank’s P/BV ratio of 1.5 and P/E multiple of 10.3 is lower than its peers, making it attractive on the valuation front. Meanwhile, Scotiabank offers a solid dividend yield of 4.7%. 

Pembina Pipeline

I believe the sharp recovery in the commodity prices, uptick in economic activities, and higher volumes could give a significant boost to Pembina Pipeline (TSX:PPL)(NYSE:PBA) stock, which is trading cheap. Pembina stock is trading at a forward EV/EBITDA multiple of 10, which is lower than its historical average. Meanwhile, its stock is also trading cheaper than its peers.

Besides trading cheap, Pembina stock offers a stellar dividend yield of 6.6%, which is backed by its high-quality fee-based ash flows. Notably, Pembina owns diversified assets that are highly contracted and generate robust fee-based cash flows. Thanks to its solid fee-based cash flows, its dividend-payout ratio is sustainable in the long run. 

Pembina’s strong backlogs, investments in growth projects, and solid capital-allocation strategy could continue to drive its revenues and cash flows. Meanwhile, contracted assets could help the company to maintain and grow its dividends. 

Algonquin Power & Utilities  

Thanks to the recent correction in its price, Algonquin Power & Utilities (TSX:AQN)(NYSE:AQN) stock is trading cheap. Furthermore, it is a reliable stock to generate a growing passive-income stream. Its regulated and contracted assets generate predictable cash flows that drive higher dividend payments. 

Notably, Algonquin Power’s dividend has a CAGR of 10% in the last 11 years. Moreover, its low-risk cash flows indicate that it could continue to grow its dividends at a healthy pace in the coming years. Its solid capital program, rate base growth, increasing renewables footprints, and cost-saving initiatives will likely support its earnings. Furthermore, strategic acquisitions will likely accelerate its growth. 

The recent correction in Algonquin Power stock has driven its yield higher. Notably, it offers a high dividend yield of over 4.8%, which is very safe. 

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 Sneha Nahata has no position in any of the stocks mentioned. The Motley Fool recommends BANK OF NOVA SCOTIA and PEMBINA PIPELINE CORPORATION.

More on Dividend Stocks

Canadian dollars in a magnifying glass
Dividend Stocks

3 High-Yield Dividend Stocks That Are Screaming Buys Right Now

Are you looking for great income stocks? Here's a trio of high-yield dividend stocks that pay insane yields right now.

Read more »

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

Transform a $5,000 TFSA Into a $50,000 Retirement Nest Egg

The TFSA is a powerful tool that can grow a small investment into a substantial retirement nest egg over time.

Read more »

A meter measures energy use.
Dividend Stocks

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

Fortis has increased its dividend annually for the past five decades.

Read more »

analyze data
Dividend Stocks

3 Dividend Stocks That Are Screaming Buys in November

Here are three top dividend stocks long-term investors won't want to ignore during this part of the market cycle.

Read more »

senior relaxes in hammock with e-book
Dividend Stocks

Generate $175/Month in Passive Income With a $30,000 Investment

Dividend aristocrats offer reliability, and many of them also offer generous yields. With sizable enough discounts, these yields can become…

Read more »

dividends can compound over time
Dividend Stocks

Best Dividend Stocks to Buy Now for Canadian Investors

These three stocks would be excellent additions to your portfolios, given their solid underlying businesses, consistent dividend growth, and healthy…

Read more »

data analyze research
Dividend Stocks

3 Undervalued Stocks to Watch in November

Not all undervalued and discounted stocks are destined or poised to make a comeback soon, and a protracted timeline can…

Read more »

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

The Perfect TFSA Stocks for Long-Term Growth

Two industry heavyweights are perfect stock holdings in a TFSA for long-term money growth.

Read more »