Canadian investors still have a chance to pick up top dividend stocks that offer a shot at huge gains in the next 12-18 months.
Let’s take a look at two Canadian stocks that appear oversold today and pay generous dividends while you wait for the rebound.
Power Corp. (TSX:POW) is somewhat unique in the Canadian market. The firm is a holding company that owns majority positions in a number of Canadian wealth management and insurance businesses.
Some trade on the TSX Index and are popular picks in their own right, including Great-West Lifeco and IGM Financial. These sit under the Power Financial umbrella, which until earlier this year also traded on the Canadian stock market. Power Corp. took Power Financial private in February 2020.
Canadian fintech firm Wealthsimple is also part of the portfolio.
In Europe, Power Corp. is part owner of Pargesa, which in turn has its own holdings that include stakes in some of Europe’s top global companies.
Power Corp. gives investors exposure to a number of top Canadian financial brands and businesses that serve institutions, large companies, and individuals across the country. Canada Life, IG Wealth Management, Mackenzie Investments and Investment Planning Counsel are some of the well-established subsidiaries.
The rebound in the stock market off the March low bodes well for Power Corp., and investors could see strong numbers in the Q3 2020 report.
At the time of writing, the stock trades near $25.50 per share and offers a 7% dividend yield. Power Corp. traded above $34 earlier this year, so there is decent upside opportunity as the market recovers.
If you are searching for a non-bank financial picks for your portfolio, Power Corp. deserves to be on your radar.
The industry faces ongoing public and government opposition to new major pipeline projects. That is expected to continue. Enbridge abandoned plans for its Northern Gateway development due to these concerns.
However, a market capitalization of roughly $90 billion gives Enbridge the firepower to make acquisitions to fuel growth. Consolidation in the energy infrastructure segment is expected to continue in coming years and Enbridge will likely be active in the market.
In addition, the vast reach of the existing asset base provides numerous opportunities for small tuck-in projects that are easier to complete and can add solid new revenue streams.
Enbridge worked hard in the past couple of years to clean up its corporate structure and improve the balance sheet. The company has the capacity to self-fund its ongoing capital program while maintaining the dividend.
As new assets go into service, distributable cash flow should increase at a pace of roughly 5-7% per year. This would support ongoing dividend hikes in the same range over the medium term. The current payout provides a yield of 7.5%.
Enbridge traded at $57 in February before the pandemic lockdowns hit revenue on the pipeline system. Investors who buy today can pick the stock up for close $43 per share.
The volume drop is due to reduced crude oil throughput moving from producers to refineries that make a variety of fuel products,
while airlines won’t require the same volumes of jet fuel for three or four years, gasoline and diesel fuel demand should rebound quickly.
The bottom line
Powe Corp. and Enbridge pay great dividends that should be safe. The stocks appear cheap right now and should trade meaningfully higher in the next few years.
Motley Fool Canada's market-beating team has just released a brand-new FREE report revealing 5 "dirt cheap" stocks that you can buy today for under $49 a share.
Our team thinks these 5 stocks are critically undervalued, but more importantly, could potentially make Canadian investors who act quickly a fortune.
Don't miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.
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 owns shares of and recommends Enbridge. Fool contributor Andrew Walker owns share of Power Corp. and Enbridge.