2 Unreasonably Battered Dividend Stocks I’d Buy Before a Correction

Want a bargain? It doesn’t get better than Toronto-Dominion Bank (TSX:TD)(NYSE:TD) and Enbridge Inc. (TSX:ENB)(NYSE:ENB).

| More on:
man sitting in front of 3 screens programming

Image source: Getty Images

Canadian investors are always on the look out for a great deal, and that means finding solid stocks that provide a bargain. This usually happens when an industry or the markets as a whole are in a downturn. So, if you have some cash set aside for such an investment, there are some great options out there. Today, I’ll be focusing on two.

TD

The banking industry as a whole has been trying to prove its worth over the last few months. Analysts are warning that banking stocks will be sinking, and soon, come a recession. This has been scaring off investors, and in some cases it’s been unjustified.

That seems to be the case with Toronto-Dominion Bank (TSX:TD)(NYSE:TD). At first, you might look at the stock’s recent performance and think I’m crazy to call it battered. After all, since the market slump around the new year, the stock has been trending upward — up 13% since the dip.

But what I’m interested in is the company’s net asset value (NAV), and while the stock trades at $76.43 at writing, analysts put its worth closer to $81. That another potential upside of almost 7%. If we look even further ahead, analysts expect the stock to move past the $90 mark — another upside of almost 20%!

Where does that potential come from? The company’s recent expansion into the United States, where TD is now Canada’s most American bank. The company is one of the top 10 banks in the U.S. and is still growing fast. Next up on the agenda is expanding into the high-margin area of wealth and commercial management. So, investors should be thrilled to buy at this price.

Enbridge

Another industry that has been beaten down lately is the oil and gas industry as a whole. Prices seemed to be on the rebound a couple months back but have again slumped, leaving even well-established companies like Enbridge (TSX:ENB)(NYSE:ENB) with stock prices far below NAV.

The stock currently trades at $48.08, after climbing its way back from a $41 stock price, reaching the $50 mark and then crashing down yet again due to the pause on its Line 3 project. But again, if we look at the NAV for this stock, shares should be trading at $62 — an upside of almost 30%!

All this stock needs is two things to get going again: the rebound of the oil and gas industry and for its expansion projects to come online. The company has US$16 billion worth of growth projects in the works, all set to be running by 2021. They’ve paid for this through the extensive long-term contracts that will continue bringing in steady cash for decades.

Again, here we have an industry heavyweight being weighed down by a slow industry. For investors looking for a bargain, you can’t get much better than Enbridge.

Foolish takeaway

Both of these stocks are part of industries that have been beaten down in the last year. While there are definitely some stocks out there that need the industry to rebound before investors should consider them again, these two are not those stocks. Both TD and Enbridge offer investors long-term gains should they buy now at such a cheap price. They also offer two solid dividends that should keep investors happy while they wait for the rebound.

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 Amy Legate-Wolfe owns shares of ENBRIDGE INC. The Motley Fool owns shares of Enbridge. Enbridge is a recommendation of Stock Advisor Canada.

More on Dividend Stocks

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Dividend Stocks

TFSA Magic: Earn Enormous Passive Income That the CRA Can’t Touch

If you're seeking out passive income, with zero taxes involved, then get on board with a TFSA and this portfolio…

Read more »

Man with no money. Businessman holding empty wallet
Dividend Stocks

2 Stocks Under $50 New Investors Can Confidently Buy

There are some great stocks under $50 that every investor needs to know about. Here’s a look at two great…

Read more »

think thought consider
Dividend Stocks

Down 10.88%: Is ATD Stock a Good Buy After Earnings?

Alimentation Couche-Tard (TSX:ATD) stock might not be the easy buy-case it once was. Here’s a look at what happened.

Read more »

money cash dividends
Dividend Stocks

TFSA Dividend Stocks: Earn $1,200/Year Tax-Free

Canadian stocks like Fortis are a must-have in your portfolio to earn tax-free yields for decades.

Read more »

sale discount best price
Dividend Stocks

1 Dividend Stock Down 11 Percent to Buy Right Now

Do you want a great dividend stock down 11% that can provide years of growth potential? Here's one heavily discounted…

Read more »

Growth from coins
Dividend Stocks

1 Grade A Dividend Stock Down 11% to Buy and Hold Forever 

If you're looking for the right dividend stock at the right price, you're going to want to consider this insurance…

Read more »

Target. Stand out from the crowd
Dividend Stocks

2 Dividend Stocks to Double Up on Right Now

Are you looking for dividend stocks to buy right now? Here are two top picks!

Read more »

edit Taxes CRA
Dividend Stocks

Tax Time: How to Keep More of Your Money

Nearly everyone hates paying taxes, although Canadians can lessen the financial pain with the right tax strategies.

Read more »