3 Great TSX Stocks Under $10 a Share

Now that valuations have plunged, it could be the best time to look for cheap stocks with high dividend yields. 

| More on:

Ridiculously cheap stocks are usually overlooked by investors who consider them risky. However, the sub-$10 cohort of listed companies has some interesting and relatively attractive opportunities that are difficult to ignore. Some of these rare micro-stocks hold the potential to deliver stunning returns for investors who catch onto them early. 

With that in mind, here are three stocks under $10 I’m keeping a close eye on. 

Lucrative royalties

The royalty business is fascinating. Buying a brand and charging franchisees to use it is a capital-efficient way to create a recurring source of long-term income. Diversified Royalty Corp. (TSX:DIV) is an industry leader with some easily-recognizable brands in its portfolio.

The company owns Sutton, Oxford Learning, Mr. Lube and Mr. Mikes among other local brands with multiple outlets across Canada. Small- and medium-sized business owners who run these franchises pay the company part of their revenues alongside other fees. 

The company is so profitable that it’s managed to maintain one of the highest dividend yields on the stock market: 7.64%. The stock trades at 30 times trailing earnings and just 15 times forward earnings, which means it could have plenty of upside left. 

In fact, analysts estimate the stock could jump by a double-digit percentage this year alone. However, the stock has struggled to offer any price appreciation over the past few decades and we could be facing an economic slowdown in 2020, so I would take these estimates with a grain of salt. 

American Hotels

American Hotel Income Properties REIT LP (TSX:HOT.UN) is another excellent option for dividend income-seeking investors. The stock has plunged 18.5% since the start of the year and now trades at $5.6, pushing its dividend yield to an eye-watering 15.4%. 

My Fool colleague Nelson Smith ran the numbers and figured out that the stock trades at less than six times normalized funds from operations. He calls the stock “ridiculously cheap.”

However, I believe that valuation may be too good to be true. The coronavirus pandemic has drastically cut travel, and the hotel industry could be on the precipice of some rough quarters ahead. 

That said, the value of commercial property could spike as mortgage rates are cut across North America, which could ultimately reduce HOT’s cost of capital and increase its per share book value. Investors should certainly take a closer look here to figure out if this unique REIT fits their portfolio. 

Healthcare Properties

Unlike the two stocks mentioned above, NorthWest Healthcare Properties REIT is uniquely resistant to the ongoing crisis. Healthcare is immune to the business cycle, and the demand for Northwest’s properties could actually spike in this ongoing pandemic. 

NorthWest is also well diversified, with medical properties in the U.K., Germany, and Australia, which reduces the trust’s exposure to any specific economy and bolsters the company’s underlying earnings. 

The stock currently trades at $9.3 and offers a 6.5% dividend yield. The stock has actually gained 2% since the start of this year, which means it’s already serving investors as a hedge against the ongoing market crash. 

Bottom line

Now that valuations have plunged, it could be the best time to look for cheap stocks with high dividend yields. 

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 recommends NORTHWEST HEALTHCARE PPTYS REIT UNITS. Fool contributor Vishesh Raisinghani has no position in any of the stocks mentioned. 

More on Investing

how to save money
Investing

Could This Undervalued Canadian Stock Be Your Ticket to Millionaire Status?

Not every millionaire-maker stock is a consistent grower. Some are temporary but substantial bullish opportunities that you can ride to…

Read more »

Confused person shrugging
Dividend Stocks

Passive Income: How Much Do You Need to Invest to Make $625 Per Month?

This retirement passive-income stock proves why investors need to always take into consideration not just dividends but returns as well.

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

Secure Your Future: 3 Safe Canadian Dividend Stocks to Anchor Your Portfolio Long Term

Here are three of the safest Canadian dividend stocks you can consider adding to your portfolio right now to secure…

Read more »

money goes up and down in balance
Dividend Stocks

Is Fiera Capital Stock a Buy for its 8.6% Dividend Yield?

Down almost 40% from all-time highs, Fiera Capital stock offers you a tasty dividend yield right now. Is the TSX…

Read more »

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Wednesday, December 11

In addition to the U.S. inflation report, the Bank of Canada’s interest rate decision and press conference will remain on…

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

How to Use Your TFSA to Double Your TFSA Contribution

If you're looking to double up that TFSA contribution, there is one dividend stock I would certainly look to in…

Read more »

Income and growth financial chart
Investing

A Top-Performing U.S. Stock That Canadian Investors Really Should Own

Amazon (NASDAQ:AMZN) is starting to run faster in the AI race, making it a top U.S. pick for 2025.

Read more »

Person uses a tablet in a blurred warehouse as background
Tech Stocks

2 Canadian AI Stocks Poised for Significant Gains

Here are two top AI stocks long-term investors may want to consider before the end of the year.

Read more »