After a rocky September and October, many cheap Canadian dividend stocks have started to look dirt cheap, and they’re worth picking up, even if you’re in the belief that markets are due to complete a 10% spill to put it officially into a correction. Undoubtedly, there are more than a fair share of bears on Wall Street these days.
While valuations across the board may be a tad higher than historical averages, there are also plenty of value plays out there that are well below historical and industry average multiples. Such deep-value stocks may not be the most exciting places to be, but for those looking to get the most bang from their buck, I think they’re worth checking out.
In Canada, the TSX Index looks rich with neglected value names. So, if a wide margin of safety is what you’re after, check out the following Canadian stocks which look too cheap to ignore, given their promising long-term dividend growth trajectories.
Cascades (TSX:CAS) is a lesser-known tissue product manufacturer with a mere $1.6 billion market cap at writing. The 3.1% dividend yield is bountiful, but nothing to write home about, given the larger number of names out there that boast safe and secure yields well above the 4% or even 5% mark. The stock is down just shy of 4% over this past year on the back of fluctuating input prices. The firm isn’t just your run-of-the-mill toilet paper and paper towel maker, though. Its specialty lies in creating quality tissue products with a considerable amount of recycled fibres. In an era that calls for better ESG ratings from stocks, Cascades shines. The company has a “B” CDP score, meaning the firm has done relatively decent at doing its part to curb emissions.
For a firm that makes good use of recycled fibres, a “B” rating isn’t magnificent by any means. Still, I think that operations and the firm’s trajectory could push the dividend and CDP score much higher over the next few years. For now, dividend investors can appreciate the growing dividend and the stock’s low correlation to the TSX with the near-zero beta (currently at 0.04).
Cascades won’t make you rich. It’s in a boring industry, but with market waters getting rougher, boring ought to be beautiful through the eyes of investors. Finally, at 0.4 times sales, 0.9 times book value, and 10.8 times trailing earnings, CAS stock is likely to be one of the cheapest stocks you’ll come across.
Intact (TSX:IFC) isn’t the cheapest Canadian insurance play out these days, with shares trading at 2.1 times sales and 13.9 times trailing earnings. Not by a long shot. Given Intact has outgrown its peers, with incredibly well-managed property and casualty (P&C) business, IFC is one of the names that’s worth paying a bit more for, given its premium characteristics.
With a knack for topping on earnings, Intact is a known outperformed and is arguably one of the best-in-class non-bank financials in the Canadian markets. Although COVID applied some pressure, as was the case with most other financials, the company has posted a magnificent recovery, as other Canadian insurers struggle to breakout. The recent 7.5% dip in the stock, I believe, is a gift to long-term investors who want steady appreciation and a nice, growing dividend (currently yielding 2%).
To put it simply, Intact still has its fundamentals intact despite last year’s turbulence. And for that reason, it’s a great buy on any weakness.