Bonds haven’t been this unrewarding in quite some time. Rock-bottom interest rates don’t appear to be going higher anytime soon amid this horrific pandemic. As such, passive-income investors may desire to rotate some of their fixed-income debt securities into more bountiful dividend stocks. This piece will look at five of my favourites.
Nutrien (TSX:NTR)(NYSE:NTR) is an agricultural commodities kingpin that’s made a big comeback of late, surging around 88% from its lows of March. The stock sports a bountiful 3.4% yield and is a great way to play the secular trend of a growing population, which, I believe, will call for greater crop yields.
Despite the recent rally, NTR stock still looks dirt cheap. Shares trade at a modest 1.5 times sales and 1.4 times book value. The fertilizer play has structural advantages, such as widespread retail locations and a potash production edge, that warrant a moat. If you seek a long-term holding, look no further than the name.
Enbridge (TSX:ENB)(NYSE:ENB) is a pipeline behemoth that’s fallen under pressure in recent years, as the energy sector crumbled. With the pandemic’s end in sight, I see relief for the top-notch midstream operator that could have room to run in 2021.
While the dividend (currently yielding 7.4%) looks unsustainable, I’d argue that given the shareholder-friendly nature of management that the dividend is far safer than it seems. The company has cash flow-generative projects on the horizon, and while they will face regulatory hurdles, long-term investors willing to deal with volatility have more than enough incentive to hold on.
Bank of Montreal
Bank of Montreal (TSX:BMO)(NYSE:BMO) looks like the best bank for your buck. The 4.3%-yielding Canadian bank had a tough time navigating through the coronavirus crisis, as it had a large exposure to the energy patch. With a recovery in sight and a brighter recovery trajectory in 2021, I suspect BMO’s provisions will shrink considerably as its earnings surge, potentially making up for lost time.
The stock trades at 1.2 times book value and is a bargain for passive-income investors bullish on a big banking rebound. I’ve been adding to my position all through 2020 and will continue to do so on any further dips en route to the post-pandemic world.
Inovalis REIT (TSX:INO.UN) sports an 8.9% yield today. If you bought in the March dip, when I’d pounded the table on the name, you would have locked in a double-digit yield alongside steep capital gains. Today, Inovalis REIT is up nearly double from its March lows, and as rent collection returns to normalcy, I think shares could be headed back to $11.
The REIT gives Canadians an easy way to bet on French and German office real estate and is a compelling way to diversify your geographic exposure on the TSX. Office space is a tough area to be in amid worsening COVID-19 cases. That said, I’m still a fan of the risk/reward scenario here now that we have more clarity with the vaccine timeline.
SmartCentres REIT (TSX:SRU.UN) boasts a juicy 7.9% yield. Like Inovalis, Smart is a great way to play the post-COVID world. For those unfamiliar with the REIT, it’s behind SmartCentres strip malls, many of which are anchored by Wal-Mart Stores locations and other essential retailers that kept their doors open during the worst of this pandemic.
As rent collection fully normalizes, I expect Smart shares will be back at $35, as the managers running the show continue to diversify the REIT into mixed-use properties with their compelling project pipeline. I own shares of the REIT personally and intend to add on weakness.
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 Joey Frenette owns shares of BANK OF MONTREAL and Smart REIT. The Motley Fool owns shares of and recommends Enbridge. The Motley Fool recommends Inovalis REIT, Nutrien Ltd, and Smart REIT.