4 Undervalued Stocks With Great Dividends

Domtar Corp. (TSX:UFS)(NYSE:UFS), Saputo Inc. (TSX:SAP), WSP Global Inc. (TSX:WSP), and Empire Company Limited (TSX:EMP.A) are undervalued and have great dividends, making them ideal investment options. Which should you buy?

| More on:

As a fundamental investor, I’m always on the lookout for high-quality companies whose stocks are trading at discounted levels and have great dividends and, after a recent search of the market, I came across four very attractive opportunities. Let’s take a quick look at each, so you can determine if you should buy one of them today.

1. Domtar Corp.

Domtar Corp. (TSX:UFS)(NYSE:UFS) is one of the world’s leading providers of fibre-based products. Its products include communication, specialty, and packaging papers, market pulp, and absorbent hygiene products.

Its stock currently trades at just 13.8 times fiscal 2016’s estimated earnings per share of US$2.54 and only 10.1 times fiscal 2017’s estimated earnings per share of US$3.48, both of which are inexpensive compared with its trailing 12-month price-to-earnings multiple of 20.3, its five-year average multiple of 17.7, and its industry average multiple of 28.7.

Additionally, the company pays a quarterly dividend of US$0.415 per share, or US$1.66 per share annually, giving its stock a yield of about 4.7%. Investors must also note that it has raised its annual dividend payment for five consecutive years, and its two dividend hikes since the start of 2015, including its 6.7% hike in February 2015 and its 3.8% hike in May of this year, have it on pace for 2016 to mark the sixth consecutive year with an increase.

2. Saputo Inc.

Saputo Inc. (TSX:SAP) is the largest dairy processor in Canada, and it’s one of the 10-largest dairy processors in the world. Its products include cheese, fluid milk, extended shelf-life milk and cream products, and dairy ingredients, and its brands include Saputo, Dairyland, DairyStar, La Paulina, Neilson, and Woolwich Dairy.

Its stock currently trades at just 21.7 times fiscal 2017’s estimated earnings per share of $1.77 and only 19.4 times fiscal 2018’s estimated earnings per share of $1.98, both of which are inexpensive compared with its trailing 12-month price-to-earnings multiple of 25.5, its five-year average multiple of 35.8, and its industry average multiple of 26.9.

Additionally, the company pays a quarterly dividend of $0.135 per share, or $0.54 per share annually, giving its stock a yield of about 1.4%. A 1.4% yield is not high by any means, but investors must note that it has raised its annual dividend payment for 16 consecutive fiscal years, and its strong financial performance could allow this streak to continue in fiscal 2017.

3. WSP Global Inc.

WSP Global Inc. (TSX:WSP) is one of the world’s leading providers of sustainable consulting in the built and natural environment, which involves designing, engineering, and managing projects in numerous industries. It has operations across North America, South America, Europe, Asia, Africa, and Australia.

Its stock currently trades at just 16.7 times fiscal 2016’s estimated earnings per share of $2.36 and only 14.3 times fiscal 2017’s estimated earnings per share of $2.76, both of which are inexpensive compared with its trailing 12-month price-to-earnings multiple of 19.7, its five-year average multiple of 26.5, and its industry average multiple of 26.

Additionally, the company pays a quarterly dividend of $0.375 per share, or $1.50 per share annually, giving its stock a yield of about 3.8%. Investors must also note that it has maintained this annual rate since 2012, and its ample free cash flow generation could allow it to continue to do so going forward or allow it to raise its dividend in the near future.

4. Empire Company Limited

Empire Company Limited (TSX:EMP.A) is one of Canada’s largest owners and operators of grocery stores through its Sobey’s banner with more than 1,500 locations across every province. It also holds a 41.5% ownership stake in Crombie Real Estate Investment Trust, which is one of Canada’s largest owners and managers of commercial real estate with 261 retail and office properties across the country.

Its stock currently trades at just 13.5 times fiscal 2017’s estimated earnings per share of $1.42 and only 12.2 times fiscal 2018’s estimated earnings per share of $1.57, both of which are inexpensive compared with its trailing 12-month price-to-earnings multiple of 20.5, its five-year average multiple of 16.2, and its industry average multiple of 36.5.

Additionally, the company pays a quarterly dividend of $0.1025 per share, or $0.41 per share annually, giving its stock a yield of about 2.1%. A 2.1% yield is not high by any means, but investors must note that it has raised its annual dividend payment for 21 consecutive fiscal years, and its 2.5% hike last month has it on pace for fiscal 2017 to mark the 22nd consecutive year with an increase.

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.

Fool contributor Joseph Solitro has no position in any stocks mentioned.

More on Dividend Stocks

Two seniors float in a pool.
Dividend Stocks

TFSA: How to Earn $1,890 in Annual Tax-Free Income

Plunk these investments into your TFSA to earn passive income and avoid the taxman.

Read more »

Engineers walk through a facility.
Dividend Stocks

1 TSX Stock I Wouldn’t Touch With a 10-Foot Pole

AtkinsRéalis (TSX:ATRL) is one TSX stock I'd never invest in.

Read more »

edit Woman in skates works on laptop
Dividend Stocks

3 No-Brainer Stocks to Buy Under $30

These three stocks all offer a huge deal for investors looking for dividends, as well as growth that will last.

Read more »

You Should Know This
Dividend Stocks

How to Convert a $300 Monthly Investment Into $338 in Monthly Income

If you want a certain amount in monthly passive income, invest a similar amount today and leave the rest to…

Read more »

Increasing yield
Dividend Stocks

3 Income Stocks With Big Yields to Consider in April 2024

If you haven’t yet made your March investments, here are three income stocks to buy the dip and lock in…

Read more »

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Dividend Stocks

RRSP Investors: Don’t Miss Out on This Contribution Hack!

This hack has so many benefits for you -- not just when you put it in your RRSP but for…

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

Passive Income: 2 Safe Dividend Stocks to Own for the Next 10 Years

Dividend stocks such as Manulife and Fortis can help you generate a stable and recurring passive-income stream.

Read more »

Young woman sat at laptop by a window
Dividend Stocks

3 Dividend Stocks Everyone Should Own for the Long Haul

For investors looking for top-tier dividend stocks to buy and hold for the long term, here are three of my…

Read more »