Retirees: 2 Cheap Dividend Stocks to Buy Now for Monthly Passive Income

These high-yield stocks look cheap right now.

| More on:
grow dividends

Image source: Getty Images

Retirees and other investors focused on passive income can still find good stocks to buy today that appear undervalued and offer attractive dividend yields.

Pembina Pipeline

Pembina Pipeline (TSX:PPL)(NYSE:PBA) just announced that its CEO is leaving the firm to pursue other opportunities. The stocks dropped on the news, extending a recent slide from the 2021 highs. C-level management changes can cause some uncertainty, but the impact in this case shouldn’t last long. The current CFO is taking over until the board chooses a new leader for the business.

Pembina Pipeline is a key player in the midstream sector of the Canadian energy industry. The company provides oil and gas producers with a variety of services, including pipelines, natural gas gathering, gas processing, and logistics. Pembina Pipeline also has propane export facilities and is pursuing a number of partnerships that include a possible LNG facility and a carbon-sequestration development.

The rebound in the energy sector in 2021 should lead to increased capital investments in the next few years, as producers look to capitalize on high oil and natural gas prices. Pembina Pipeline reported solid results for Q3 2021, and the Q4 numbers should be decent as well.

Pembina Pipeline pays a monthly dividend of $0.21 per share. At the current share price near $41 investors get a 6.15% dividend yield. The shares traded as high as $43 earlier this month, so investors have a chance to buy Pembina Pipeline on a bit of a dip.

TransAlta Renewables

TransAlta Renewables (TSX:RNW) owns or has interests in 27 wind farms, 13 hydroelectric facilities, eight natural gas power facilities, 21 solar sites, a natural gas pipeline, and a battery storage project.

TransAlta Renewables recently purchased a 12 MW portfolio of 20 solar facilities in North Carolina. The project will add annual EBITDA of about US$9 million. TransAlta Renewables also recently completed its Windrise project. The site is expected to contribute annual EBITDA of $20 to $22 million starting in 2022.

Consolidation in the renewable energy sector is expected to continue in the coming years, and TransAlta will likely be active, as it seeks to grow revenue and cash flow.

The stock trades below $19 per share at the time of writing compared to the 2021 high near $24.50. Unplanned downtime at a gas-fired power plant, reduced wind activity, and problems with tower foundations at a wind facility in New Brunswick have put pressure on revenue and cash flow this year. For the first nine months of 2021, comparable EBITDA fell $7 million compared to the same period in 2020.

The operational challenges are frustrating, but should get sorted out in the coming months. New assets will help offset the drop in cash flow from the downtime at the wind facilities that need to be repaired.

As such, the stock selloff appears overdone, and the shares now offer an annualized yield of about 5%.

The bottom line on top stocks for passive income

Pembina Pipeline and TransAlta Renewables pay generous monthly dividends that offer attractive yields. The stocks look cheap right now and should be solid picks for a buy-and hold portfolio focused on passive income.

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 recommends PEMBINA PIPELINE CORPORATION. Fool contributor Andrew Walker owns shares of Pembina Pipeline.

More on Investing

A child pretends to blast off into space.
Investing

1 Small Step for NASA, 1 Giant Leap for Space Stocks

NASA's partnerships with private space companies should reward investors.

Read more »

Young Boy with Jet Pack Dreams of Flying
Investing

Former Domino’s Pizza CEO Joins Forces With Restaurant Brands. Is the Stock Set to Skyrocket?

Patrick Doyle turned Domino's around starting in 2010, achieving tremendous results. What's in store for QSR stock?

Read more »

Hourglass projecting a dollar sign as shadow
Investing

New Investor? If You Do Nothing Else With Stocks, Learn This Lesson

Time is the most powerful thing on an investor's side. Here are two powerful ways to use it.

Read more »

lab worker inspects test tubes
Dividend Stocks

Warren Buffett’s Buying This Passive Income Stock

Berkshire began buying this chemical company earlier this year and hasn't stopped.

Read more »

Arrowings ascending on a chalkboard
Tech Stocks

Why I Think Nuvei Stock Has Market-Beating Potential

Given its growth initiatives, expanding addressable market, and attractive valuation, I believe Nuvei has the potential to outperform the broader…

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

Need Passive Income? Turn $5,000 Into $23.85 Every Month

If you're looking for passive income that comes in like a paycheque, this dividend stock provides that to you along…

Read more »

A worker drinks out of a mug in an office.
Metals and Mining Stocks

5 Things to Know About Nutrien Stock in December 2022

Trading at heavily depressed multiples, Nutrien stock is a great opportunity, as it delivers solid financial results and an optimistic…

Read more »

A shopper makes purchases from an online store.
Tech Stocks

Shopify Stock Rose 15% in November: Is it a Buy Today?

Shopify (TSX:SHOP) stock rallied 15% this month but is still down 69% year to date, so should investors worry that…

Read more »