Dividend Stocks on Sale for Christmas

Buy low for high yields. Add quality dividend-growth stocks such as Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) and Enbridge Inc. (TSX:ENB)(NYSE:ENB) to your Christmas shopping list now. Your future self will thank you later.

| More on:
The Motley Fool

Don’t forget to add some dividend stocks to your Christmas shopping list. These stocks actually have a tendency to pay out higher dividends year after year.

As their dividends continue to grow, your income from owning them increases. The longer you hold them, the more income you receive.

Canadian banks are on sale

If you’d bought Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) five years ago, your income would have increased 42.9%. You would have earned dividends of $100 in 2010, but by this year you would instead receive $142.9.

At under $56 per share, Bank of Nova Scotia is on sale at a 21% discount, and it yields an above-average yield of 5%.

Another cheap bank today is National Bank of Canada (TSX:NA). At under $40, the bank is on sale at a 20% discount, and it yields a historically high yield of 5.4%.

If you’d bought the bank five years ago, your income would have increased 63.6%. So if you earned $100 in dividends in 2010, you would have received $163.6 the next year without accounting for further dividend increases.

Pipelines are on sale

The energy infrastructure leaders are on sale. That’s probably why we see TransCanada Corporation (TSX:TRP)(NYSE:TRP) ticking up 11% over the past five trading days. It went up 5% on Monday alone!

TransCanada is still cheap though. Based on its normal price to cash flow ratio (P/CLF), its fair value should be around $56. So at about $46, it’s discounted by almost 18% and yields 4.5%. It’d be better to buy shares when they have a yield closer to 5% if the opportunity arose though.

If you’d bought this energy infrastructure company five years ago, your income would have increased 30%. So if you earned $100 in dividends in 2010, you would have received $130 the next year without accounting for further dividend increases.

Enbridge Inc. (TSX:ENB)(NYSE:ENB), on the other hand, yields 5.1%. Based on its normal P/CLF, its fair value should be around $61. So at $41, it’s discounted by almost 33%.

Although Enbridge has a larger discount and is expected to experience higher growth than TransCanada, Enbridge is higher risk than TransCanada. Enbridge has higher financial leverage and S&P gives it a credit rating of BBB+, while TransCanada enjoys a rating of A-.

Self-directed investors have the flexibility to decide if they want to take on more risk for a potentially higher return by investing in Enbridge over TransCanada. That said, there’s nothing stopping you from buying more of one company over the other instead of only investing in one.

If you’d bought Enbridge five years ago, your income would have increased 120%. So if you earned $100 in dividends in 2010, you would have received $220 the next year without accounting for further dividend increases.

Conclusion

The banks are more stable investments than the energy infrastructure companies. Nonetheless, investors who buy today at depressed levels and above-average yields will be very happy down the road as they’ll likely be receiving higher dividends and sitting on some nice capital gains.

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 Kay Ng owns shares of Enbridge, Inc. (USA), Bank of Nova Scotia (USA), and TransCanada.

More on Dividend Stocks

Glass piggy bank
Dividend Stocks

How to Accelerate Your TFSA Returns From Dividend Stocks

The stock market saw a correction in January, as investors booked profits ahead of the central bank’s interest rate hikes. The TSX …

Read more »

money cash dividends
Dividend Stocks

Top 3 Dividend Stocks in Canada for 2022

Canada is home to some of the best dividend stocks in the world. With finance, telecoms, and energy dominating the …

Read more »

calculate and analyze stock
Dividend Stocks

2 Top TSX Stocks to Put on Your TFSA Buy List

TFSA investors are searching for undervalued TSX stocks to buy that have the potential to deliver big gains in 2022. …

Read more »

Payday ringed on a calendar
Dividend Stocks

Get Unbelievable Monthly Income With High-Yield Dividend Stocks

The only thing better than a dividend stock is a stock that pays dividends every month. For people who live …

Read more »

gas station, convenience store, gas pumps
Dividend Stocks

1 Key Catalyst Investors in Couche-Tard Stock Need to Watch

One of the top value stocks on the TSX, Alimentation Couche-Tard (TSX:ATD) has been a strong performer over the past year. …

Read more »

Value for money
Dividend Stocks

2 Top Value Stocks I’m Looking to Buy Right Now

Value investing is a lot more than just grabbing stocks that look inexpensive. The shares of an organization in permanent …

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

RRSP Investors: 2 Top Canadian Dividend Stocks to Buy for Total Returns

Canadian savers are searching for good TSX stocks to buy inside their self-directed RRSP that pay reliable dividends and can …

Read more »

Cogs turning against each other
Dividend Stocks

2 Dividend Stocks That Could Stabilize Your TFSA During a Market Correction

A common strategy for investing during a market downturn is to allocate a greater proportion of your portfolio towards dividend …

Read more »