Investing in quality, lower-priced stocks can help you buy shares of several companies at a low cost, offering diversification and lowering investment risk. In this article, I have identified three smart TSX stocks that trade below $20, which you can consider buying today. Let’s dive deeper.
InPlay Oil
Valued at $177 million by market cap, InPlay Oil (TSX:IPO) has returned more than 200% to shareholders in the past five years. InPlay Oil is engaged in the acquisition, exploration, development, and production of petroleum and natural gas properties in Canada. It produces and sells crude oil, natural gas, and natural gas liquids with interests in the Cardium assets located in Alberta.
In the second quarter (Q2) of 2024, InPlay reported an average quarterly production of 8,657 barrels of oil equivalent per day (boe/d), an increase of 2% year over year. Its adjusted funds flow stood at $20.1 million or $0.22 per share, up 22% compared to the March quarter. Further, its free adjusted funds flow of $14 million allowed InPlay to reduce its net debt by 15% in the last three months.
InPlay’s adjusted funds flow enabled the company to return $4.1 million to shareholders via its monthly base dividend. It pays shareholders an annual dividend of $0.18 per share, indicating a yield of over 9%.
Priced at six times forward earnings, IPO stock is relatively cheap, given its strong cash flow and tasty dividend yield. The TSX dividend stock trades at a 100% discount to consensus estimates, given its stock price of $1.96.
Doman Building Materials Group stock
Valued at $664 million by market cap, Doman Building Materials (TSX:DBM) has returned close to 230% in dividend-adjusted gains since September 2014. Doman Building distributes building materials and related products in Canada, the U.S., and Hawaii. With more than 100,000 acres of private timberlands and strategic licenses, it distributes lumber, renovation, and electrical products.
The company’s sales have increased from $1.33 billion in 2019 to $2.46 billion in the last 12 months. In this period, its operating income has more than doubled from $44.4 million to $113 million.
Its steady expansion of profit margins enables DBM to pay shareholders an annual dividend of $0.56 per share, indicating a yield of 7.3%. Priced at $7.6 per share, DBM stock trades at a 20% discount to consensus price targets.
Nexus Industrial REIT stock
The final under-$20 stock on my list is Nexus Industrial REIT (TSX:NXR.UN). Valued at $830 million by market cap, Nexus Industrial REIT has returned over 60% to shareholders in the past five years. However, elevated interest rates have meant the real estate investment trust (REIT) also trades 37% below all-time highs, allowing you to buy the dip.
In Q2 of 2024, Nexus Industrial increased its net operating income (NOI) by 14.2% year over year to $31.6 million due to the acquisition of income-producing industrial properties and growth in same-property NOI. The company also advanced the construction of a 96,000-square-foot intensification industrial project in Ontario that would generate an 8% return.
Nexus Industrial REIT is priced at $8.82 per unit, similar to its consensus price target estimates.
