While the TSX 60 Index is trading near an all-time high, a few high-quality dividend stocks are still trading cheap and are offering above-average yields. Though these shares are trading cheap, their fundamentals remain strong. Further, these companies have a business that consistently generates resilient cash flows and supports their payouts.
So, if you love dividends, let’s dive into three TSX dividend stocks that are cheap and offer reliable yields.
A cheap utility stock
Utility stocks are reliable dividend bets due to their predictable and regulated cash flow streams. Within the utility space, Capital Power (TSX: CPX), with its eight consecutive dividend increases and cheap valuation, looks attractive to invest in this month.
Its low-risk business model, high-quality diversified renewable assets, and a robust pipeline of growth opportunities augur well for future growth and are expected to support its future payouts. Meanwhile, its target payout ratio of 45-55% is easily sustainable in the long run.
Further, Capital Power trades at a next 12-month EV/EBITDA multiple of 7.8, reflecting a discount of about 36% from its peer group average. Moreover, Capital Power offers a high yield of 5.4%.
A banking giant with the longest payout history
Thanks to its ability to generate strong profits, Bank of Montreal (TSX: BMO)(NYSE: BMO) has the longest dividend-payout history in Canada. To be precise, the banking giant has been paying a dividend for 192 years. To top it off, its dividend has grown at a CAGR of 6% in the last 15 years, while it currently offers a dividend yield of 3.1%.
While the economic expansion and lower provisions have led to a massive recovery in Bank of Montreal stock, it is still trading cheap compared to peers. Its P/B multiple of 1.7 is lower than Royal Bank of Canada and Toronto-Dominion bank’s P/B multiples of 2.1 and 1.8, respectively. Further, Bank of Montreal’s next 12-month P/E ratio of 11.1 is well below its peers.
Its high-quality asset base, diverse revenue streams, improving efficiency, and solid balance sheet indicate that the bank will continue to generate stellar earnings in the coming years, which will drive its future payouts. Moreover, its target payout ratio of 40-50% is sustainable in the long run.
A top-quality, high-yield dividend stock
With a high yield of over 6.3% and a robust dividend-payment history of more than 66 years, Enbridge (TSX: ENB)(NYSE: ENB) emerges as an obvious dividend stock to invest in this month. It is worth noting an investment of $10,000 in Enbridge stock will generate a dividend income of $633 annually. Further, this income will likely grow with you, as the company has consistently increased its dividends at a healthy pace for more than two-and-a-half decades.
Though Enbridge stock has recovered sharply on the back of a rebound in demand and higher commodity prices, it is still trading at a lower multiple than the pre-COVID levels. Enbridge stock is trading at a next 12-month EV/EBITDA multiple of 12.3, which is lower than the pre-pandemic levels of 13.3.
The overall improvement in the operating environment, recovery in demand, strength in its core business, and the secured capital program could continue to drive its distributable cash flows and support higher dividend payments. Further, its payouts are highly reliable, thanks to its resilient and diversified cash flows and contractual framework.
