3 Top Canadian Value Stocks to Buy Right Now

Given their healthy growth prospects and attractive valuation, these three undervalued Canadian stocks can deliver superior returns over the next two years.

| More on:
edit Business accounting concept, Business man using calculator with computer laptop, budget and loan paper in office.

Image source: Getty Images

The recent statement by the U.S. Federal Reserve Chairman Jerome Powell that the rate hikes are unlikely to happen anytime soon appears to have improved investors’ sentiments, driving the Canadian equity markets higher. Amid the recent surge, the S&P/500 Composite Index is trading around 18.4% higher for this year. The steep increase in Canadian stocks this year has pushed their valuations higher. However, here are three stocks that are still trading at attractive valuations and provide excellent buying opportunities.

BCE

I have opted for BCE (TSX:BCE)(NYSE:BCE), one of the three leading telecom players in the Canadian market, as my first pick. Over the last four quarters, the company has added 115,916 new customers, thanks to its investments in expanding its 5G, fibre, and rural wireless home internet networks. Meanwhile, the company recently acquired 271 new licences by spending $2.07 billion. These spectrum wins could aid the company in expanding its 5G coverage across the country.

The company is continuing with its accelerated capital spending, strengthening its 5G network, wireless home internet, and broadband services for rural and remote communities across various provinces. Along with these initiatives, the improvement in economic activities and roaming revenue amid the easing of travel restrictions could boost the company’s financials in the coming quarters.

Despite its healthy growth prospects, BCE’s valuation looks attractive. Currently, its forward price-to-earnings and forward price-to-sales multiples stand at 19.8 and 2.4, respectively. Further, it also pays a quarterly dividend of $0.875 per share, with its forward yield standing at 5.39. So, I believe BCE would be an excellent addition to your portfolio.

Algonquin Power & Utilities

Algonquin Power & Utilities (TSX:AQN)(NYSE:AQN) provides utility services to around one million customers across North America. It also operates several renewable power-generating facilities while selling the power through long-term agreements. Given its low-risk, regulated assets, the company’s financials are usually stable.

Meanwhile, Algonquin Power & Utilities’s management is expanding its utility and power-generating facilities and has invested around $3.15 billion in the first six months of this year. Further, the company expects to invest a further $6.3 billion over the next four-and-a-half years, boosting its assets and financials in the coming years. Meanwhile, the company could also benefit from an increased transition towards clean energy.

However, amid the weakness in the renewable energy segment, it has lost over 6% of its stock value this year. The decline in its stock price has dragged its valuations down, with its forward price-to-earnings multiple standing at 18.9. Meanwhile, Algonquin Power also pays a quarterly dividend, with its forward yield standing at a healthy 4.34%.

Suncor Energy

Despite the recovery in energy demand, Suncor Energy (TSX:SU)(NYSE:SU) still trades over 40% lower than its pre-pandemic levels. Also, its forward price-to-sales and forward price-to-earnings multiples stand at 0.9 and 7.3, respectively. Meanwhile, the easing of restrictions amid widespread vaccination and slowdown in new infections have improved economic activities, driving oil demand and prices higher. Suncor Energy, with its integrated business model, is well equipped to benefit from higher oil prices.

The company looks to expand its base business while optimizing its integrated value chain. It has planned to invest around $5 billion over the next five years. These initiatives could boost its EBITDA by $2 billion per annum. Further, Suncor Energy’s cost-cutting initiatives and debt-reduction programs could drive its financials in the coming quarters. So, I am bullish on Suncor Energy. It also pays quarterly dividends, with its forward yield currently standing at 3.47%.

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 has no position in any of the stocks mentioned. Fool contributor Rajiv Nanjapla has no position in any of the stocks mentioned.

More on Dividend Stocks

protect, safe, trust
Dividend Stocks

Worried About a Recession? 2 TSX Blue-Chip Stocks to Protect Your Capital

If you fear a recession coming on soon, here are two blue-chip Canadian stocks to add to your portfolio for…

Read more »

Silver coins fall into a piggy bank.
Dividend Stocks

New TFSA Investors: 2 Top TSX Stock to Create a Self-Directed Retirement Fund

Top TSX dividend stocks are now on sale for new TFSA investors.

Read more »

money while you sleep
Dividend Stocks

Worried About the Market? 2 Dividend Stocks That Let You Sleep at Night

Here's why Restaurant Brands (TSX:QSR) and Enbridge (TSX:ENB) are two top dividend stocks to buy in this uncertain market right…

Read more »

money cash dividends
Dividend Stocks

How 1 Absurdly Cheap Stock Can Generate $100 in Monthly Passive Income

You can generate $100 or more in monthly passive income from one high-yield stock trading at an absurdly cheap price…

Read more »

Retirees sip their morning coffee outside.
Dividend Stocks

How I’d Invest $1000 in February to Make Easy Passive Income

Looking to earn some extra passive income in February but don't have much cash? Build an easy portfolio with these…

Read more »

sad concerned deep in thought
Dividend Stocks

Is it Worth Investing in Rogers or Shaw Before the Pending Merger?

A Rogers stock and Shaw stock deal looks all but certain, yet should investors still buy the stock? Or are…

Read more »

runner ties shoe while stopped on grass outside
Dividend Stocks

Is Nutrien Stock a Buy in February 2023?

Nutrien stock should benefit from the very favourable supply/demand fundamentals in the agriculture business in 2023.

Read more »

thinking
Dividend Stocks

Is Brookfield Asset Management a Buy in February 2023?

Brookfield Asset Management is among the largest stocks trading on the TSX. Let's see why BAM stock is a buy…

Read more »