3 TSX Stocks That Became Too Cheap to Ignore

The TSX keeps posting new highs, although there are still stocks that are too cheap to ignore. You can form a solid income portfolio with the Bird Construction stock, Stingray stock, and Medical Facilities stock.

Christopher Liew, CFA

Christopher is a CFA Charterholder and a former financial advisor at RBC.

Published June 17, 2021 10:03 am EDT

The S&P/TSX Composite Index posted a new record to start the week of June 14, 2021. Canada’s primary stock market finished at 20,157.70 and could be on track to hit a new milestone this month. Energy stocks continue the march towards a 60% year-to-date gain and outperform the TSX by a mile.

For Canadians looking for great buys, three dividend stocks are too cheap to ignore. You won’t spend more than $10 per share to own Bird Construction (TSX: BDT), Stingray Group (TSX: RAY.A), and Medical Facilities (TSX: DR). The average dividend yield is 4.0%, which should be ideal for forming a solid dividend portfolio.

Monthly payouts

Bird Construction is the country’s premier construction company. Many income investors prefer this industrial stock because the payouts are monthly, not quarterly, like most dividend payers. While the share price is slightly lower from a month ago, market analysts forecast a 23% climb to $12 in the next 12 months. At $9.78 per share, the dividend yield is 3.95%.

I agree with the buy recommendation, given the impressive financial results in Q1 2021 (quarter ended March 31, 2021). Bird reported a 38.2% increase in construction revenue versus Q1 2020. The increase in net income was a mind-blowing 534%. You can throw in the $128.1 million working capital and $79.9 million non-restricted cash for good measure.

Bird had a backlog and pending backlog of $2.62 billion and $1.68 billion, respectively, at the quarter’s end. According to Bird President and CEO Teri McKibbon, it was the 10th successive quarter that its trailing 12-month Adjusted EBITDA margin improved. The integration with Stuart Olson is also paying off handsomely.

Generous dividend

Stingray is equally attractive as the share price is only $7.35. However, the $537.48 million global music, media, and technology company pay a generous 4.08% dividend. Market analysts recommend a buy rating and see a potential upside of 36% to $10.

The company reported an 18.7% decline in revenue for fiscal 2021 (year ended March 31, 2021) versus fiscal 2020 due to a significant drop in radio revenues. However, Stingray’s net income rose 222.9%. Furthermore, there was 3.5% organic growth in Broadcast and Recurring Commercial Music revenues.

The latest development is the partnership with Shaw Communications. On June 4, 2021, the Stingray Music TV app was made available to all Shaw TV IPTV customers across Western Canada. For Shaw TV customers, it means countless hours of uniquely tailored, high-quality music content.

Right growth opportunities

Medical Facilities flies under the radar, although it should be an interesting pick given the nature of the business. Apart from the specialty surgical hospitals in the U.S., the $214.32 million company also owns and operates an ambulatory surgery centre.

President and CEO of Medical Facilities Robert O. Horrar was pleased with the Q1 2021 (quarter ended March 31, 2021) results despite the 29.4% decrease in net income compared to Q1 2020. Meanwhile, Adjusted EBITDA increased 35.4% to $25.1 million. Nevertheless, the 1.3% in facility service revenue is an encouraging sign.

According to Horrar, management remains optimistic on the 2021 outlook primarily due to the continued rollout of the vaccines. Also, Medical Facilities has a strong balance sheet and is ready to capitalize on the right growth opportunities.