For investors with a limited amount of capital, lower-priced stocks seem like a good bet. However, you still need to identify quality companies that are trading at a discount and that are poised to deliver outsized returns over the long run.
We’ll look at three such Canadian stocks that are trading below $30 for TSX investors.
Algonquin Power & Utilities
The first stock on my list is Algonquin Power & Utilities (TSX:AQN)(NYSE:AQN), a company that derives two-thirds of its EBITDA from regulated utilities and the rest from renewable energy. AQN stock is trading at a price of $19.46, indicating a forward yield of 4.4% given its dividend per share of $0.84. AQN has increased its dividend at an annual rate of 7% in the last five years, and the stock has returned 253% since June 2011.
In the first quarter of this year, the company reported revenue of $634.5 million, an increase of 36% year over year. Its adjusted EBITDA rose 17% to $283 million while adjusted earnings soared 21% to $124.5 million in this period.
Algonquin is well poised to increase its dividends going forward, as it aims to expand its base of cash-generating assets, driving earnings higher in the process.
Northwest Healthcare Properties REIT
Northwest Healthcare Properties (TSX:NWH.UN) is an open-ended real estate investment trust. It provides investors access to a portfolio of quality healthcare real estate infrastructure in Canada and other international markets such as Brazil, Europe, Australia, and New Zealand. The company has around 200 income-generating properties, and its portfolio of medical office buildings is characterized by long-term indexed leases and stable occupancies.
In Q1, Northwest Healthcare’s sales stood at $92.6 million and AFFO per unit rose by 0.5% to $0.21. The company attributed its AFFO rise to accretive acquisitions, increased management fees, and same-property operating income growth. Its total assets under management rose 16.2% year over year to $7.7 billion.
Northwest Healthcare stock is trading at $13 per share and provides a dividend yield of a tasty 6.1%.
While the previous two stocks are solid companies that generate a stable stream of cash flows, allowing them to pay investors a dividend, HEXO (TSX:HEXO)(NYSE:HEXO) is a high-risk bet. HEXO stock is down 82% from record highs, making it the perfect contrarian bet. Valued at a market cap of $1.17 billion, investors have a 12-month average target price of $9.47 for HEXO stock, which is 18% above its current price. The stock has already gained 72% year to date.
HEXO has aggressively acquired companies this year, which should allow it to increase market share in Canada’s recreational marijuana industry. In May, it acquired Redecan for $925 million. Redecan is, in fact, Canada’s largest privately owned licensed marijuana producer. Earlier this year, HEXO also acquired Zenabis Global for $235 million. Zenabis has a strong presence in multiple European markets. HEXO also acquired 48thNorth Cannabis for $41 million in May 2021.
In the last 12 months, HEXO has reported sales of $111.6 million. After the above-mentioned acquisitions are closed, the company is on track to generate over $300 million in annual sales.
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 HEXO Corp. and NORTHWEST HEALTHCARE PPTYS REIT UNITS. Fool contributor Aditya Raghunath has no position in any of the stocks mentioned.