Value Investors: 2 Cheap Dividend Stocks With 50% Upside Potential

There are still cheap TSX Index stocks for value investors to buy today.

| More on:
Arrowings ascending on a chalkboard

Image source: Getty Images.

The stock market rally off the March low erased many of the deals in the TSX Index. Value investors, however, can still find cheap stocks that pay attractive dividends and still offer decent upside potential.

Let’s take a look at two oversold stocks that deserve to be on your TFSA or RRSP radar right now.

Bank of Nova Scotia

The Canadian banks fell hard in recent months and face some challenging times heading into 2021.

Defaults on credit card bills and mortgages will likely rise once rate relief and deferrals expire. Investors will get a sense of how bad the banks think things might be when the provisions for credit losses come out during the fiscal Q2 2020 earnings reports.

Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) trades at close to $50 per share right now compared to the 12-month high above $76. At this level, investors can pick up a 7% dividend yield.

Investors will want to keep an eye on the international division, which contributes roughly 30% of adjusted net income. The bulk of the assets are located in the Pacific Alliance countries of Mexico, Peru, Chile, and Colombia.

Pandemic reports indicate the coronavirus arrived later in Latin America than in Canada, and the economic impact might hit Bank of Nova Scotia’s international results more in the back half of the year. As such, ongoing volatility in the stock price is expected through the end of 2020.

Despite the anticipated drop in revenue and profits, the dividend should be safe.

Bank of Nova Scotia entered the crisis with a strong capital position and has the means to ride out the storm. In the event the IMF is correct, and we see a strong global economic rebound in 2021, the share price should move higher by the end of next year.


Canadian Natural Resources Limited (TSX:CNQ)(NYSE:CNQ) is a major player in the Canadian energy sector with a diversified resource base. The assets include offshore oil, oil sands, conventional heavy oil, light oil, gas liquids, and natural gas production sites. CNRL also has key energy infrastructure assets and a large portfolio of untapped land across western Canada.

Energy stocks have enjoyed a nice bounced off the March low, but they were also beaten up quite badly. CNRL currently trades close to $25 per share. It bottomed out at $11 in March and traded around $40 in February.

The company says it has the balance sheet strength to ride out the downturn and recently vowed to keep paying the dividend. At the current share price, investors pick up a 6.7% yield.

CNRL has the flexibility to move capital to its highest-margin opportunities depending on shifts in market prices. Natural gas, for example, is holding up well, and CNRL is Canada’s largest independent natural gas producer.

The company has a breakeven price of roughly US$30 per barrel of oil. WTI oil briefly traded negative last month but is back to US$33 per barrel on falling supply and growing demand from countries that are opening their economies.

The bottom line

Bank of Nova Scotia and CNRL are top-quality companies that still appear oversold. Investors who buy today get paid above-average dividend yields while they wait out the recession.

Once the economic recovery kicks into gear, these stocks should move higher. In fact, it wouldn’t be a surprise to see a gain of 50% from the current stock prices over the next two or three years.

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 BANK OF NOVA SCOTIA. Fool contributor Andrew Walker owns shares of CNRL.

More on Bank Stocks

hand using ATM
Bank Stocks

Better Stock to Buy Now: TD Bank or Scotiabank?

As far as the large Canadian banks are concerned, let's dive into two of the best and see which one…

Read more »

edit Woman calculating figures next to a laptop
Bank Stocks

Should You Load Up on TD Stock Now?

TD stock is near its lowest price in three years. Is TD Bank now oversold?

Read more »

A close up color image of a small green plant sprouting out of a pile of Canadian dollar coins "loonies."
Bank Stocks

TD Stock’s Dividend Yield Hits 5.4%: Is It Finally Time to Buy?

While TD Bank stock trades sideways, it's a good time to lock in a higher dividend yield.

Read more »

Hands shaking over a business deal
Bank Stocks

National Bank to Buy Canadian Western Bank: What Investors Need to Know

National Bank of Canada (TSX:NA) is acquiring Canadian Western Bank (TSX:CWB) in a historic deal for Canadian banks.

Read more »

Dice engraved with the words buy and sell
Bank Stocks

TD Bank Stock: Buy, Sell, or Hold at the 12-Month Low?

TD is near its 12-month low. Is more downside on the way?

Read more »

Person holds banknotes of Canadian dollars
Bank Stocks

If the Loonie Falls Against the U.S. Dollar, This Canadian Stock Could Gain

TD Bank (TSX:TD) stock finally looks like a decent investment as the loonie weakens further against the U.S. dollar.

Read more »

hot air balloon in a blue sky
Bank Stocks

Prediction: These 2 Canadian Bank Stocks Are Next in Line to Pop

Two Canadian bank stocks, one big and one small, are likely to pop following their Q2 fiscal 2024 results and…

Read more »

Double exposure of a businessman and stairs - Business Success Concept
Bank Stocks

Should You Buy TD Bank Stock for its 5.3% Dividend Yield?

Down 29% from all-time highs, TD Bank stock offers you a tasty dividend yield in 2024.

Read more »