Investors planning to start a passive-income stream could consider investing in top-quality dividend-paying stocks. Further, one doesn’t need a lot of initial cash to start an investment in dividend stocks as shares of several fundamentally strong are trading incredibly cheap, providing an excellent opportunity for buying.
With this backdrop, let’s look at three Canadian stocks that are trading cheap and offer compelling yields near the current market price.
Telus
Trading under $30 and the next 12-month (NTM) price-to-earnings multiple of 22, Telus (TSX:T) is a solid dividend stock to earn reliable passive income. Through its multi-year dividend-growth program, the company targets semi-annual dividend growth, with annual increases in the range of 7-10%.
Notably, the company declared a dividend worth $2.1 billion in 2023. Moreover, since 2004, this telecom giant has returned approximately $25 billion to shareholders, including $20 billion in dividends.
Telus’s growing customer base, industry-leading wireless and PureFibre broadband networks, and focus on streamlining its operating costs enable the company to consistently generate solid earnings and cash flows and offer a higher dividend. Looking ahead, its investments in wireless network technologies and national broadband network leadership will enable it to drive its customer base and reduce churn, supporting its free cash flows.
The company’s target dividend payout ratio of 60-75% of free cash flow is sustainable in the long term. Moreover, it offers a high dividend yield of 6.5% (based on its closing price of $23.19 on February 13).
Enbridge
Enbridge (TSX:ENB) looks incredibly cheap near the current price levels. Notably, shares of this energy infrastructure company are trading NTM enterprise value/EBITDA multiple of 10.7, representing a discount of about 30% from its historical average. While Enbridge stock is trading cheap, it offers a compelling yield of 7.9%.
Enbridge’s high yield and solid dividend payment history make it a top dividend stock to earn a steady passive income. For instance, Enbridge has uninterruptedly paid a dividend for over 69 years. Meanwhile, it has increased its dividend for 29 consecutive years. Furthermore, its dividend sports a compound annual growth rate of 10% during that period.
With its diversified revenue base, contractual arrangements, power-purchase agreements, and cost-of-service tolling arrangements, Enbridge is well-positioned to generate solid distributable cash flows, which will support higher dividend payments. Further, its multi-billion secured capital projects, accretive acquisitions, and investments in conventional and green energy assets augur well for growth.
NorthWest Healthcare REIT
Down about 53% in one year, NorthWest Healthcare Properties (TSX:NWH.UN) stock looks incredibly cheap near the current levels. The prolonged high interest rate environment led NorthWest’s management to reduce its monthly dividend payouts to fortify its balance sheet and liquidity position. This led to a correction in its share price. While the company cut its dividend, it still offers an attractive yield of 8.7%.
While NorthWest is focusing on solidifying its balance sheet, the expected interest rate cut, its defensive real estate portfolio, and a high occupancy rate of 96% bodes well for growth. Moreover, its long average lease expiry term of 13.2 years and inflation-protected rents position it well to steadily increase same-property net operating income and drive its monthly payouts.
