3 Dividend Stocks Are Out of Favour and Yield 4% Right Now

Do you want decent income and price appreciation? Then consider buying these three out-of-favour dividend stocks.

If you invest in the same dollar amounts in these three dividend stocks that are out of favour, you’ll earn an average yield of about 4.2% right now!

Dividend stock with a 3.9% yield

Dividend stock Brookfield Renewable Partners (TSX:BEP.UN)(NYSE:BEP) had a great run of approximately 72% during the pandemic year in 2020. Since then, the renewable power stock has been pretty much in correction mode. This year could be the year it bottoms. If not, you get a decent cash-distribution yield of 3.9% to wait. And given the management’s track record of execution, it’s only a matter of time before the dividend stock restarts a rally.

BEP just raised its cash distribution by 5.3%, which marks its 13th consecutive year of dividend increases.

In late January 2022, Ryan Bushell commented on BEP:

“[The 2020] year was great, now stock’s weak. Long-term, you’d be happy to own it. [Brookfield Asset Management] gives them access to capital and geographic sourcing. Acquisition just this morning. Assets are Canadian hydro-electric, which are dependable and long-term. Good entry point for a great company with a global reach.”

Ryan Bushell, president and portfolio manager at Newhaven Asset Management

Interested investors can choose to buy Brookfield Renewable Corporation, the corporation version of the dividend stock, for a small premium to earn dividends in their non-registered accounts.

Algonquin stock yields 4.9%

Continuing with the renewable energy theme, we have Algonquin Power & Utilities (TSX:AQN)(NYSE:AQN). If you like BEP, you may also like Algonquin that has a renewable power portfolio and regulated utility services. Its renewable power portfolio is primarily populated with long-term contracts that generate stable cash flows. Its regulated utility operations are diverse across natural gas, electric, and water utility services. This portfolio makes predictable earnings because of its regulated nature.

Here’s what David Baskin thought of the dividend stock in late January 2022:

“For a taxable account so you get the tax credit. It pays a nice, rising dividend, but shares have drifted lower in the past year, until it’s now attractive. AQN is among the best in renewable energy.”

David Baskin, president of Baskin Wealth Management

At writing, Algonquin yields nearly 4.9%. Like BEP, it’s a Canadian Dividend Aristocrat. AQN stock has increased its dividend for 11 consecutive years with a 10-year dividend-growth rate of 9.5%. It’s a much larger and more diversified utility than it was a decade ago. Going forward, it may increase its dividend by about 7-9% instead, which would still be above-average growth in the utility sector.

Restaurant Brands stock yields 3.8%

Utility stocks are an essential component of a diversified dividend stock portfolio. If you already own enough utility stocks, you might consider this other out-of-favour dividend stock Restaurant Brands International (TSX:QSR)(NYSE:QSR) in the consumer discretionary sector. The dividend stock could increase its dividend again as soon as next week when it reports its Q4 and full-year 2021 results.

Restaurant Brands is a high free cash flow business. Its trailing-12-month operating cash flow was US$1,568 million, which translated to tremendous free cash flow of US$1,452 million. However, this is also why the company has a high leverage ratio. Its debt-to-equity ratio was about 7.5 times at the end of Q3 2021. Its annual interest expense is about US$488 million, equating to an interest rate of about 2.6% of its total debt, which is not bad. However, rising interest rates will surely increase its cost of capital. This may be why the stock is depressed.

According to Yahoo Finance, the consensus 12-month price target suggests a discount of about 20% in the dividend stock. This translates to near-term upside potential of approximately 25%.

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 recommends Brookfield Asset Management Inc. CL.A LV and Restaurant Brands International Inc. Fool contributor Kay Ng owns shares of Algonquin, Brookfield Asset Management, Brookfield Renewable, and Restaurant Brands International.

More on Dividend Stocks

calculate and analyze stock
Dividend Stocks

This 5.5% Dividend Stock Pays Cash Every Single Month!

This REIT may offer monthly dividends, but don't forget about the potential returns in the growth industry its involved with.

Read more »

Silver coins fall into a piggy bank.
Dividend Stocks

How to Use Your TFSA to Earn up to $6,000 Per Year in Tax-Free Passive Income

A high return doesn't mean you have to make a high investment -- or a risky one -- especially with…

Read more »

path road success business
Dividend Stocks

2 High-Yield Dividend Stocks to Buy Hand Over Fist and 1 to Avoid

High yields are great and all, but only if returns come with them. And while two of these might, another…

Read more »

Man holds Canadian dollars in differing amounts
Dividend Stocks

This 7% Dividend Stock Pays Cash Every Month

A high dividend yield isn't everything. But when it pays out each month and offers this stability, it's worth considering!

Read more »

young people stare at smartphones
Dividend Stocks

GST/HST “Vacation”: Everything Canadians Need to Know

The GST/HST "vacation" is a little treat for the holidays, along with a $250 payment. What should you do with…

Read more »

Train cars pass over trestle bridge in the mountains
Dividend Stocks

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

Can CNR stock continue its long-term outperformance into 2025 and beyond? Let's explore whether now is a good time to…

Read more »

coins jump into piggy bank
Dividend Stocks

The Smartest Dividend Stocks to Buy With $500 Right Now

These top dividend stocks both offer attractive yields and trade off their highs, making them two of the best to…

Read more »

Middle aged man drinks coffee
Dividend Stocks

Here’s the Average TFSA Balance at Age 35 in Canada

At age 35, it might not seem like you need to be thinking about your future cash flow. But ideally,…

Read more »