Canadians with very little capital can participate in the stock market and start dividend investing. Even if you only have $50, you can purchase one or two cheap or inexpensive stocks on the TSX. For moneyed investors, cash is a bad investment. Thus, no matter how little your money is, it would best to let it work than keep it idle.
Novice investors usually start small to test the water. A single stock can cost $50, so you buy those that trade for significantly below your scant capital. Diversified Royalty (TSX: DIV) and Canacol Energy (TSX: CNE), for example, sell for less than $5 per share. You can split the money between the two for diversification.
Both may be second-liners or obscure names, but the stocks are excellent additions to investment portfolios of yield-hungry investors. The companies pay lucrative dividend yields. Besides the potential price appreciation, your money will generate dividend income.
High-quality royalty partners
Diversified Royalty started as a capital pool before becoming a certified royalty firm seven years ago. The $329.41 million multi-royalty company derives cash flows from royalty streams. It means that it acquires top-line royalties from well-managed businesses and franchisors.
As of July 2, 2021, the share price is only $2.71, but the dividend yield is an over-the-top 7.38%. Assuming you own $2,500 worth of the royalty stock instead of $25, your dividend earning is $184.50. In a Tax-Free Savings Account (TFSA), the income is tax-free.
The six royalty partners in 2021 are among the established businesses in North America. Mr. Lube is a leading quick lube provider in the routine automotive maintenance sector. Mr. Mikes is a full-service casual dining restaurant that specializes in signature steaks and home-branded wines and beers.
The other four are Air Miles (customer loyalty program), Sutton (real estate services), Nurse Next Door (home care), and Oxford Learning (supplemental education). Diversified maintains different geographic exposure and chooses high-quality partners to ensure the growth of purchased royalties.
High-yield energy stock
Canacol Energy is a dwarf compared to energy giants such as Enbridge and Pembina Pipeline. However, the $600.71 million petroleum and natural gas producer in Columbia attracts yield-conscious investors. At $3.35 per share, the dividend yield is 6.21%. The yield is nearly at par with Enbridge (6.66%) and Pembina (6.36%).
With oil demand and prices rising this year, TSX’s energy sector (+53.92%) is the top performer thus far in 2021. In Q1 2021 (quarter ended March 31, 2021), Canacol reported a net loss of $3.1 million or 88% less than the $26 million net loss in Q1 2020.
Management expects Canacol’s business and financial performances to improve in the ensuing quarters. The Columbian government might end its countrywide shutdowns soon as the economy shows signs of recovery.
For the rest of 2021, among Canacol targets to drill up to 12 exploration, appraisal, and development wells in a continuous program. Other operational objectives include strategic acquisitions to expand its exploration prospect inventory and execute a definitive agreement to construct a new gas pipeline.
Ideal start
The TSX should maintain its upward momentum as Canada’s economic recovery gets fully underway. Now is the best time to go into dividend investing if your finances allow it. While the stocks in focus are not even the best you can find, both are ideal to start the ball rolling.
