2 Dividend Stocks I Just Bought With My TFSA Contribution

Still looking to invest your TFSA contributions? You’re not alone. I just bought Cineplex Inc. (TSX:CGX) and another stock that offers solid upside potential.

| More on:

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

Yes, it’s April, and I still have TFSA contribution room remaining. There’s no need to rush and use up all the TFSA contribution room that you may have accumulated. Essentially, that’s $6,000 from this year and any withdrawals from previous years that you haven’t contributed back.

However, when there are great stock-buying opportunities available, you’ve got to take them. I believe these two dividend stocks may pleasantly surprise investors over this year or the next.

Here’s how.

Cineplex (TSX:CGX)

There has been a lot of negative sentiment around Cineplex stock lately. Do you recall that the stock traded at above the $50-per-share level as recently as June 2017? That was about 21 times cash flow, which was way too expensive.

Fast forward to today and Cineplex stock has lost more than half of its value. Thanks to the substantial stock decline and cash flow growth, Cineplex now trades at a much cheaper cash flow multiple of about 7.3 at $24.35 per share as of writing.

Moreover, the stock offers a high yield of 7.15%, which is supported by a recent adjusted free cash flow payout ratio of about 61%.

There’s a clear value proposition in Cineplex. When the stock’s sentiment turns positive from a potentially enthusiastic reception for its movie slate, Cineplex can trade at more normalized levels in the $35-40 range over the next two years, which represents more than 43-65% upside potential.

Combining the upside with the monthly dividend and an investment in Cineplex stock today can lead to total returns of about 57-80% over the next two years!

Value for money

Brookfield Business Partners (TSX:BBU.UN)(NYSE:BBU)

Brookfield Asset Management’s (BAM) newest spinoff is Brookfield Business Partners, which began trading on its own in mid-2016. It is essentially BAM’s flagship vehicle for investing in the business services and industrials sectors.

Particularly, BAM has been doing this as a proven, highly profitable business for more than 30 years. It looks for global opportunities to invest in businesses that are low-cost producers, have high barriers to entry, or provide opportunities for operational improvements.

Sometimes these businesses aren’t profitable, but that’s where BAM’s operational expertise can generate value. BAM improves the businesses substantially and sells them for hefty profits. For example, BBU announced last month it would sell a $1 billion global facilities management business, of which it holds a controlling interest in.

BBU is BAM’s only listed partnership that aims for high 15-20% return on investments, which means that it can generate some serious money for long-term investors in a TFSA.

I believe BBU has already started its turnaround since the new year. However, the stock is still meaningfully (about 16%) off from its 2018 and all-time high. So, it remains a great growth idea for accumulation.

It’s difficult to value BBU stock because of its ongoing strategy to buy and sell businesses. Currently, Scotiabank has a one-year target of US$46 on the stock, which represents market-beating upside of 20% in the near term.

Investor takeaway

Investors shouldn’t feel the rush to max out their TFSA immediately at the start of every year. It’ll do good for you to take your time, waiting for the right investment opportunities for your tax-free portfolio.

Currently, I believe Cineplex and Brookfield Business Partners to be excellent dividend stocks to buy. Investors should do their own due diligence to see if the stocks make sense for their portfolios or trading strategies.

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 has shares of Brookfield Asset Management, Brookfield Business Partners, Bank of Nova Scotia, and Cineplex. The Motley Fool owns shares of Brookfield Asset Management, BROOKFIELD ASSET MANAGEMENT INC. CL.A LV, and BROOKFIELD BUSINESS PARTNERS LP. Bank of Nova Scotia is a recommendation of Stock Advisor Canada.

More on Dividend Stocks

edit Back view of hugging couple standing with real estate agent in front of house for sale
Dividend Stocks

Why Real Estate Stocks Are a No-Brainer Addition to Your Portfolio

Real estate stocks, especially REITs, offer some distinct advantages over other types of stocks, making them must-have additions to most…

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

3 Top TSX Dividend Stocks to Buy for Monthly Passive Income

Top TSX stocks with monthly dividends now trade at cheap prices for investors seeking passive income.

Read more »

Canadian Dollars
Dividend Stocks

Create Free Passive Income and Turn it Into Thousands With 1 TSX Stock

If you can't afford to invest, you can certainly create passive income another way and use that to invest in…

Read more »

Payday ringed on a calendar
Dividend Stocks

Canadian Dividend Investors: 2 ETFs That Pay Monthly Income With High Yields

Dividend ETFs often pay out monthly distributions compared to dividend stocks.

Read more »

think thought consider
Dividend Stocks

2 Stocks I Own and Will Buy More of if They Fall

Stocks tend to go up in the long run. Therefore, buying a basket of diversified stocks on dips should lead…

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

2 Oversold TSX Dividend Stocks to Buy for Passive Income

Blue-chip dividend stocks such as Royal Bank of Canada and Manulife Financial pay investors a tasty forward yield.

Read more »

TFSA and coins
Dividend Stocks

TFSA Passive Income: 3 Solid Stocks to Earn $355 Every Month

Looking to earn steady passive income? Here are three solid TSX stocks that can help you earn a worry-free passive…

Read more »

Dividend Stocks

RRSP Investors: 2 Stocks to Buy in August for Dividends and Capital Gains

RRSP investors can still find top TSX dividend stocks trading at cheap prices today for a buy-and-hold portfolio.

Read more »