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2 Top High-Yield Stocks That Could Soar in 2022

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Once in a while, investors get a chance to buy quality high-yield dividend stocks at a discount. This is rare in the current market, but there are still some top undervalued stocks to buy that pay generous distributions.

Pembina Pipeline

Pembina Pipeline (TSX:PPL)(NYSE:PBA) trades near $40 per share at the time of writing and provides a 6.2% dividend yield.

The stock is already up more than 30% in 2021, but more gains should be on the way. Pembina Pipeline traded above $53 per share before the pandemic. Energy prices are higher than they were at that time, and rising fuel demand should drive increased throughput on the company’s pipelines in the coming months.

Pembina Pipeline moved quickly at the beginning of the pandemic to shore up the balance sheet and delayed some capital projects until the market returned to more normal operations. The decisions allowed the board to maintain the dividend hike that was put in place in early 2020.

Now, Pembina Pipeline is starting to ramp up the organic projects again and is also eyeing growth through strategic partnerships and acquisitions. Pembina Pipeline has a deal in place to buy Inter Pipeline for $8.3 billion in stock. If the takeover goes ahead, Pembina Pipeline intends to boost the monthly distribution nearly 5%.

At the same time, Pembina Pipeline recently announced partnerships with First Nations groups. One will pursue a potential LNG facility in British Columbia. The other is lining up a potential bid for the TransMountain pipeline project currently owned by the Canadian government.

As the energy sector continues its recovery, Pembina Pipeline should benefit. Investors who buy now get a great dividend yield. It wouldn’t be a surprise to see the stock hit $50 by the end of next year.

Power Corp

Power Corp (TSX:POW) is a Canadian holding company with majority positions in some of Canada’s top publicly traded insurance and wealth management companies. The stock has a market capitalization of roughly $25 billion at the time of writing.

Through its Power Financial group, Power Corp controls 66.8% of Great-West Lifeco (TSX:GWO) and 62.1% of IGM Financial (TSX:IGM). The position in GWO is worth about $23 billion. The stake in IGM is worth more than $6 billion.

In addition, Power Corp has venture capital interests through its various subsidiaries Power Sustainable and Sagard Holdings. Power Sustainable owns more than 35% of Lion Electric after exercising rights to add to its position. That’s worth about $1.4 billion at the time of writing.

Various parts of the portfolios have combined interests that control most of fintech disruptor Wealthsimple, which recently raised cash at a $5 billion valuation.

Power Corp pays a generous dividend that provides a 4.5% dividend yield. The stock is up 37% this year but still looks cheap when you add up the sum of the parts. Investments such as Lion Electric and Wealthsimple alone could balloon in value over the next two or three years.

The bottom line

Pembina Pipeline and Power Corp pay attractive distributions that should continue to grow. The stocks look cheap right now in an otherwise expensive market and could deliver big capital gains in the next few 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 PEMBINA PIPELINE CORPORATION. Fool contributor Andrew Walker owns shares of Pembina Pipeline and Power Corp.

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