The Canadian stock market has been incredibly volatile due to several factors in recent months. The S&P/TSX Composite Index is down by 13.82% from its 52-week high as of this writing.
Many investors are understandably worried about their investment portfolios amid all the uncertainty. Such a significant downturn across the entire stock market results in substantial losses. However, value-seeking investors look at downturns like these as an opportunity to buy high-quality stocks at a bargain.
With stocks across most sectors of the Canadian economy down from their all-time highs, you cannot consider just any asset an undervalued stock. It is important to conduct your due diligence to determine whether the underlying business has the potential to deliver stellar long-term returns. Today, I will discuss two such dividend stocks you can consider adding to your investment portfolio.
Dream Industrial REIT
Real estate investment trusts (REITs) allow you to try your hand at real estate investing without buying investment properties yourself. Dream Industrial REIT (TSX:DIR.UN) is one such trust you can consider for this purpose.
Dream Industrial REIT is a $3.04 billion market capitalization trust that invests in a portfolio of industrial properties leased by various businesses, protecting its cash flows from downturns in the residential real estate sector.
As of this writing, Dream Industrial REIT trades for $11.83 per unit and boasts a juicy 5.92% dividend yield. It is down by 30% year to date amid broader market weakness and is attractively valued. Its price-to-earnings multiple is down to an attractive 3.22 ratio, and it is relatively undervalued with a 0.72% price-to-book ratio.
Stelco Holdings
Stelco Holdings (TSX:STLC) is a $2.41 billion market capitalization Canadian steel company headquartered in Hamilton. Founded over a century ago, Stelco is one of the few steel-producing companies in Canada.
Formed as several steel producers banded together in 1910, Stelco declared bankruptcy in 2007, followed by its acquisition by US Steel. Steel prices have taken a hit in recent months, but a positive price momentum for the commodity might send Stelco share prices soaring in the coming months.
The company’s second-quarter earnings report for fiscal 2022 saw it deliver 13% year-over-year revenue growth, and its operating income increased by 12% in the same period. As of this writing, Stelco Holdings stock trades for $35 per share, down by 38.5% from its 52-week high.
It boasts an attractive 1.52 price-to-earnings ratio, suggesting that it has the potential to deliver substantial growth. It could be an excellent investment for value-seeking investors at current levels.
Foolish takeaway
It is important to remember that stock market investing is inherently risky, especially during volatile market conditions. If you are willing to assume the risk, you can consider investing in undervalued stocks with the potential to deliver stellar long-term returns.
Dream Industrial REIT and Stelco Holdings stock appear to be attractively valued right now, but there is a chance they might become even better bargains if the market downturn continues. You can consider waiting on the sidelines and keeping a close eye on these stocks to scoop up shares if prices go lower.
