If you’ve been lucky enough to accumulate wealth over the course of this recent bull run, it might be time to set some money aside in safer, more passive investments.
Some sectors of the economy are inexplicably undervalued. That means stocks are trading at low multiples and throwing off high dividend yields. These could be the perfect targets for passive-income seekers. Here are the top three opportunities that should be on your radar.
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Passive-income opportunity #1
Enbridge (TSX: ENB)(NYSE: ENB) is an obvious candidate for passive-income seekers. The energy infrastructure giant has been underestimated by investors for roughly half a decade, ever since the oil market crashed. Now, we’re in a very different environment. Oil prices are steadily rising, and we could even face a supply crunch this winter.
In fact, some experts suggest the cost of a barrel could reach US$100 within just a few months. That’s because renewable energy sources have struggled to keep up with a sharp rebound in consumer demand.
Higher oil prices could be the perfect catalyst for Enbridge stock. It’s currently trading at a price-to-earnings ratio of 16.9 and offers a 6.6% dividend yield. Meanwhile, the management team believes dividends could be even more generous in the future. Distributable cash flow (DCF) is expected to grow between 5% and 7% annually until 2023.
This combination of steady growth and low valuation is rare right now. That’s what makes Enbridge such a compelling passive-income opportunity.
Passive-income opportunity #2
NorthWest Healthcare Properties (TSX:NWH.UN) is yet another excellent passive-income opportunity. It’s also, arguably, the most stable stock on this list. That’s because its underlying assets are specialized properties that service medical companies. Clinics and hospitals sign multi-year leases (14 years on average) and generate earnings that have no connection to the economic cycle.
In other words, NorthWest is one of the most secure landlords in the country. Meanwhile, its underlying real estate serves as an inflation-hedge in months ahead. This is why it’s surprising that this stock is still so overlooked. It’s trading at a price-to-earnings ratio of 9.3 and offers a dividend yield of 5.9%. That’s a bargain!
Passive-income opportunity #3
Fiera Capital (TSX: FSZ) is the final passive-income opportunity on this list. It’s also the most unique. Unlike Enbridge and NorthWest, Fiera doesn’t own tangible assets. Instead, it owns a portfolio of preferred stock from small- and mid-sized companies across North America.
The company likes to focus on profitable, family-controlled businesses that are seeking growth capital but don’t want dilution or debt. The team offers these entrepreneurs cash in exchange for a small stake that has a built-in dividend yield — usually around 15%.
That’s how the company can manage to offer public investors a dividend yield of 7.95%. It’s one of the most lucrative dividend stocks on the market right now, and that’s why it deserves a spot on your watch list.
