3 Cheap Dividend Stocks to Buy Under $20

Given their stable cash flows, growth potential, and healthy dividend yields, these three dividend stocks could be an excellent addition to your portfolio.

| More on:

Amid the fears of interest rate hikes, the global equity markets have turned volatile over the last few weeks. So, given the uncertain business environment, investors can strengthen their portfolios by investing in quality dividend stocks. If you wish to buy dividend stocks, here are my three top picks that you can buy for under $20.

TransAlta Renewables

Last month, TransAlta Renewables (TSX:RNW) had announced that it needs to replace all the foundations of 50 wind turbines at its Kent Hills 1 and 2 wind sites. The management expects to complete the replacement by the end of 2023. Meanwhile, the company could incur expenses in the range of $75-$100 million while also losing monthly revenue of $3.4 million until these turbines become operational.

The announcement had led to a steep fall in TransAlta Renewables’s stock price, which trades at a 24% discount from its 52-week high. Meanwhile, the steep correction provides an excellent entry point for long-term investors. The company has an interest in 49 diverse power-producing facilities and sells most of the power through long-term contracts, thus providing stability to cash flows. These robust cash flows have allowed the company to raise its dividend at a CAGR of 3% since 2013. With its monthly dividend of $0.07833 per share, the company’s forward yield currently stands at a juicy 5.46%.

Meanwhile, the company has approximately 2.9 gigawatts of projects in the evaluation stage. Also, it focuses on strategic acquisitions to drive growth. So, given its healthy growth prospects and stable cash flows, TransAlta Renewables would be an excellent buy for income-seeking investors, despite the near-term volatility.

Algonquin Power & Utilities

Algonquin Power & Utilities (TSX:AQN)(NYSE:AQN) services around one million customers across North America, meeting their energy and water needs. It owns, operates, or has an interest in four gigawatts of renewable power-producing facilities and sells the power from these facilities through long-term contracts. Given its low-risk and regulated business and strategic acquisitions, the company has been generating substantial cash flows, which has helped it raise its dividend for the previous 11 years at a CAGR of 10%. Its forward yield currently stands at a juicy 4.78%.

Algonquin Power & Utilities, which has made a capital investment of $3.4 billion in the first nine months of 2021, expects to invest an additional $12.4 billion from 2022 to 2026, expanding its utility and power-generating assets. Along with these investments, its continued strategic acquisitions could drive its financials in the coming quarters. Given its growth initiatives and stable cash flows, the company is well equipped to continue its dividend growth.

Meanwhile, Algonquin Power & Utilities is currently trading at a 20% discount from its 52-week highs amid the weakness in renewable energy space. The correction has dragged its forward price-to-earnings multiple down to an attractive 18.5.

Pizza Pizza Royalty

The pandemic had severely hurt the food services companies. However, Pizza Pizza Royalty (TSX:PZA) has fared better than its peers due to its highly franchised business model and investments in strengthening its digital, pick-up, and delivery channels. Also, the implementation of consumer-centric safety measures and effective marketing campaigns boosted its financials.

Meanwhile, I expect these investments to continue driving Pizza Pizza Royalty’s financials in the coming quarters. Also, with the economic expansion and easing COVID-19 concerns, the company could restart the expansion of its restaurant network, driving growth. So, I believe the company’s dividend is safe. Meanwhile, it currently pays a monthly dividend of $0.06/share, with its forward yield at an attractive 6.07%.

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 and recommends PIZZA PIZZA ROYALTY CORP. Fool contributor Rajiv Nanjapla has no position in any of the stocks mentioned.

More on Dividend Stocks

profit rises over time
Dividend Stocks

These 2 Dow Stocks Are Set to Soar in 2025 and Beyond

Two Dow Jones stocks are screaming buys but Canadians must hold them in an RRSP or RRIF to avoid paying…

Read more »

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

How to Use Your TFSA to Earn Ultimate Passive Income

If you have a TFSA, then you have the key to creating ultimate passive income. All you need is a…

Read more »

Confused person shrugging
Dividend Stocks

Better Buy: Fortis Stock or Hydro One Stock?

Let's do a compare and contrast of these two top utilities stocks right now, shall we?

Read more »

A close up color image of a small green plant sprouting out of a pile of Canadian dollar coins "loonies."
Dividend Stocks

Boost Your Passive Income: 2 Canadian High-Yielders at a Bargain

Nutrien (TSX:NTR) stock and another play that appear like fantastic dividend bargains in mid-November.

Read more »

3 colorful arrows racing straight up on a black background.
Dividend Stocks

TSX Stocks Soaring Higher With No Signs of Slowing

Three TSX stocks continue to beat the market and could soar higher in an improving investment landscape.

Read more »

Hourglass and stock price chart
Dividend Stocks

Goeasy Stock: Is It Heading for a 52-Week High?

Goeasy stock has been edging higher, especially after another record-setting earnings report. So are 52-week highs in sight?

Read more »

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

Here’s the Average TFSA Balance at Age 44 in Canada

You can invest your TFSA in funds like the BMO Canadian High Yield Dividend ETF (TSX:ZDV) to grow the balance.

Read more »

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

The Best Telecom Stock to Buy Before 2025

Choosing the safest stock from a decimated sector can be tricky, but if there is a reasonable chance of full…

Read more »