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SALE: 3 Cheap (and Defensive) TSX Stocks for Passive Income

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Value investing could be back in fashion this year, and with some great-quality stocks in the TSX bargain bin, Canadians have some intriguing options today. Looking to get defensive with a portfolio? With the rising level of risk in the markets, it certainly makes sense. Today, we’ll review three dividend stocks that match good value for money with defensive clout.

A market-leading electric vehicle play

Magna International (TSX:MG)(NYSE:MGA) is ubiquitous, cheap, and rewards with a 2.8% dividend yield. Its business is spread across North America, Europe, Asia Pacific, and covers automotive systems, parts, modules, and assemblies. There’s also some steady growth here, with annual income set to grow around 7% in the foreseeable future.

A high level of physical assets, and some degree of exposure to the coronavirus shouldn’t deter investors from considering this key Canadian play for electric vehicle upside plus some passive income.

Far from being a safe-haven asset, manufacturing is usually one of the first sectors to divest oneself of in a bear market. So, what makes Magna a defensive play? Its partnership with the Beijing Electric Vehicle Co. gives Magna direct access to the high growth of the green economy, a mega-trend backed by some of the biggest corporations and investment pundits.

Given Magna’s ubiquity in the North American auto markets, wide economic moat as a leader in the parts space, and exposure to the high-growth potential of the electric vehicle industry, this company is more stable than most. In terms of auto parts sales in North America, it’s the biggest business of its type. And while auto stocks aren’t recession-proof, Magna is among the sturdiest of them.

“Lazy landlords” and overlooked gold

A popular apartment real estate investment trust (REIT), Canadian Apartment REIT (also known as CAPREIT) is a key defensive purchase for exposure to high-end rental revenue sourced from Canadian urban centres. The REIT also covers the Netherlands, offering moderate geographical diversification. It’s also cheap, trading with a P/E ratio of 5.7, well below the Canadian market average of 15.8.

A strong play for exposure to the multi-unit residential rental market, CAPREIT rewards investors with a 2.6% dividend yield. Its track record is solid, with a +67% income growth over the last 12 months and projected annual revenue growth of around 7% to look forward to.

Investors looking for a value play for the defensive aspects of precious metals with passive income thrown in have a strong play with dividend gold stock Caledonia Mining. Bringing a 3.6% dividend yield and the safety of gold, Caledonia Mining has a low P/E ratio of 2.1. It’s had a solid year with 282.9% earnings growth, and with revenue forecast to grow 16.28% annually, it’s a strong performer.

The bottom line

While analysts are still holding back on whether the coronavirus is affecting the global economy to a meaningful degree, it may be worth snapping up defensive assets before the rush begins in earnest. For a strong play on value and dividends with defensive qualities, this diversified trio of stocks would boost any TSX stock portfolio.

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 Victoria Hetherington has no position in any of the stocks mentioned. The Motley Fool recommends Magna Int’l.

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