Dividend investing is a strategy that is gaining popularity among Canadians. Typically, the best dividend stocks should help investors generate a steady stream of recurring income and benefit from capital gains over time.
Here are two such cheap dividend stocks to boost your passive income in 2024.
Adentra stock
Adentra (TSX:ADEN), valued at $1 billion by market cap, is engaged in the wholesale distribution of architectural building products to the residential, repair, remodel, and commercial construction markets. It offers a range of decorative surfaces for use in commercial and residential applications and manufactures, imports, and distributes hardwood lumber and architectural sheet goods.
With 86 facilities in the U.S. and Canada, Adentra is among North America’s largest distributors of architectural building products.
In the last decade, Adentra stock has returned close to 350% to shareholders after adjusting for dividend reinvestments. Despite its outsized gains, the company offers you a dividend yield of 1.4%, given an annual dividend payout of $0.56 per share.
While Adentra reported a decline in sales in the second quarter (Q2) of 2024, its adjusted earnings grew by 43.2% year over year to $1.06 per share. Adentra explained, “From an operations perspective, our bottom-line results continued to strengthen in the second quarter as tight operating management, successful strategy execution, and our significant diversification across products, geographies, customers, and end-markets delivered predictably robust performance, despite softer markets.”
Adentra’s gross margins have now been higher than 20% for 13 consecutive quarters, allowing it to focus on improving operational efficiencies.
Priced at nine times forward earnings, Adentra stock is quite cheap, given its earnings are forecast to expand from $3.3 per share in 2023 to $4.43 per share in 2024 and $4.82 per share in 2025.
Given its outstanding share count, Adentra pays shareholders $14 million in annual dividends. Comparatively, its free cash flow has totalled $141 million in the last 12 months, indicating a payout ratio of just 10%. Analysts remain bullish on the TSX stock and expect it to gain over 35% in the next 12 months.
Lassonde Industries stock
Valued at $1.16 billion by market cap, Lassonde Industries (TSX:LAS.A) is another cheap dividend stock offering a forward yield of 2.4%. Lassonde develops, produces, and markets a range of ready-to-drink fruit juices, drinks, and frozen juice concentrates in Canada and other international markets.
In the last 10 years, Lassonde has increased sales by 8.5%, while adjusted earnings per share have expanded by 8.6% annually. Despite its steady growth, Lassonde stock has returned less than 70% to shareholders, even after adjusting for dividend reinvestments, since September 2014. However, this underperformance allows you the opportunity to buy a quality stock at a discount.
Lassonde currently offers shareholders an annual dividend of $4 per share, indicating a forward yield of 2.4%. Considering its outstanding share count, Lassonde’s dividend expenses would total $12.3 million in the next 12 months. Comparatively, its free cash flow in the last four quarters is much higher at $114.3 million, indicating a payout ratio of less than 12%.
Priced at 10 times forward earnings, Lassonde stock is quite cheap and trades at a discount of 12% to consensus price target estimates.
