RRSP Investors: 3 Dirt-Cheap TSX Stocks With High Dividend Yields

The RRSP deadline is fast approaching. Investors can look to add dividend stocks like Enbridge and Emera to their portfolios.

| More on:
Financial technology concept.

Image source: Getty Images

The broader markets remain volatile, as investors continue to take stock of the dreaded Coronavirus. Several industries, including retail, oil, and airlines, are expected to be severely impacted in this market sell-off. But this provides investors an opportunity to buy stocks at attractive valuations.

Dividend yields and stock prices move in opposition to each other. This means in case the stock price crashes, its dividend yield will move higher, making them attractive picks for value and income investors.

We’ll look at three such stocks that have high yields and might gain momentum when the market stabilizes. With the RRSP deadline just around the corner, investors can look to allocate funds in the below companies.

NFI Group

NFI Group (TSX:NFI) is one of the top bargain buys for Canadians. I had first identified the stock as a cheap one back in December 2019, and the stock had gained over 30% until the market sell-off.

NFI is a Canada-based bus and motor coach manufacturer in North America. It has 32 fabrication, manufacturing, distribution and service centres in the United States and Canada. NFI has a price-to-sales ratio of 0.73, a price-to-book ratio of 2.5, and an estimated five-year PEG ratio of 0.47.

These valuations are extremely cheap considering NFI’s estimated double-digit earnings and revenue-growth rate over the next few years. The cherry on top is NFI’s juicy dividend yield of 5.5%, which makes it a solid value buy for investors.

Once the threat of Coronavirus is mitigated, NFI can expect coach deliveries to pick up again, which will drive top-line growth higher.

Enbridge

While the Coronavirus continues to impact global operations, investors can bet on Canada’s large-cap giant Enbridge (TSX:ENB)(NYSE:ENB). Oil prices might also plunge if global demand declines, which will be detrimental to energy companies, including Enbridge.

However, Enbridge stock has already declined by 11% in the last six trading sessions, increasing its dividend yield to a tasty 6.2%. This means a $10,000 investment in the stock will generate $620 in yearly dividend payments.

Enbridge has the world’s longest crude oil liquids transportation system, which somewhat insulates the company from the cyclical nature of commodity markets. It gathers, stores, processes, and transports natural gas in North America.

Enbridge’s large size and robust cash flows have helped the firm to consistently increase dividend payments. In December 2019, Enbridge increased its quarterly dividend by 9.8% to $0.81 per share. In the last 20 years, Enbridge has grown dividends at an annual rate of 12.13%.

Emera

Utilities are considered defensive bets or recession-proof. This means you need to consider stocks such as Emera (TSX:EMA) for your RRSP portfolio. Emera is an energy and services company that invests in electricity generation, transmission and distribution, gas transmission and utility services.

In case the economy is in doldrums, central banks tend to lower interest rates to boost demand. This move tends to benefit utility companies that invest heavily in capital expenditures and can now take on debt at lower rates.

Emera and peers are part of a regulated industry, which means the entry barriers are high. It also means cash flows will be stable, resulting in dividend increases over the long term. While the S&P/TSX 60 is down over 7%, Emera has fallen less than 4% in the last six trading sessions.

Emera has a forward yield of 4.1%, and the stock has generated annual returns of 11.5% in the last 20 years. Emera has increased dividend payments at an annual rate of 6% since 2000, and it is expected to grow dividends by 4-5% till 2022.

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.

The Motley Fool owns shares of and recommends Enbridge. The Motley Fool recommends NFI Group. Fool contributor Aditya Raghunath has no position in any of the 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 »