2 Insanely Cheap TSX Stocks That Pay Great Dividends

TSX stocks are hitting a bearish streak, and some great dividend stocks are looking insanely cheap. Here are two that are a bargain today!

| More on:
grow dividends

Image source: Getty Images

The recent TSX stock market decline is a true gift for contrarian investors. Frankly, there is a lot to worry about these days (the Omicron variant, the U.S. Federal Reserve tapering, inflation, geo-political concerns, etc.). The Cboe Volatility Index (VIX) recently spiked to a six-month high, indicating that equity investors have recently been hitting the sell button.

If you like cheap TSX stocks, this might be your opportunity

Despite all this, there is always opportunity in the madness. As Warren Buffett has famously said, “Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.” While Black Friday and Cyber Monday have already passed, the TSX stock market is selling some great companies at very attractive discounts right now.

One sector that has become insanely cheap is the energy sector. Fears around the Omicron variant have drawn the price of oil down drastically in the past few weeks. While this is concerning, it is likely only temporary. Supply-demand factors still look very favourable for this industry over the next few years. If you don’t mind some volatility but like cheap dividend stocks, here are two that look pretty interesting right now.

A cheap oil super major with 40% upside or more

Suncor (TSX:SU)(NYSE:SU) has had a strong run up in 2021. Yet it still trades at a 40% discount to its pre-pandemic price level. With a forward price-to-earnings ratio of only eight times, this TSX stock is still very cheap.

Suncor stock has lagged energy peers in 2021. Yet the company has recently been right-sizing operations, reducing debt, buying back stock, and even increasing its dividend. In fact, just last quarter, it raised its quarterly dividend by 100%! Today, this TSX stock is yielding over 5.5%.

The great news is that its dividend is sustainable so long as oil trades over US$40 per barrel. WTI oil is trading just below US$70 today. Should oil prices charge higher again, Suncor will continue to yield a ton of free cash flow.

Consequently, Suncor looks solid today. It could still see serious upside from share buybacks and even further dividend increases in the future. Suncor is well positioned to provide some solid returns for investors in 2022 and even beyond.

One of the highest-yielding stocks on the TSX

Enbridge (TSX:ENB)(NYSE:ENB), one of North America’s largest energy infrastructure businesses, has seen its stock decline nearly 11% since November. Today, it pays a quarterly dividend of $0.835 per share. On an annual basis, that equals to a 7% dividend yield. That is one of the highest dividends amongst all the stocks on the TSX Index!

To some extent, Enbridge trades in tandem with its energy-producing customers. However, this TSX stock was hit when regulators announced their rejection of Enbridge’s contracting proposal for the Mainline pipeline. While this is something to worry about, new rules will not come into effect for a number of years.

This should give Enbridge plenty of time to recalibrate the strategy for its Mainline pipeline operations. Also, a number of major new projects will enter service at the end of 2021. The increasing cash flows from these projects should help offset any potential cash flow volatility from the recent decision. For a TSX stock with an outsized yield and a cheap valuation, Enbridge looks attractive today.

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.

Fool contributor Robin Brown has no position in any of the stocks mentioned. The Motley Fool recommends Enbridge.

More on Dividend Stocks

money cash dividends
Dividend Stocks

This 8.39% Dividend Stock Can Pay $100 Cash Every Month

Consider investing in this monthly dividend stock at current levels to lock in high-yielding monthly distributions to create a good…

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

Here’s the Average TFSA Balance in 2024

The Bank of Montreal (TSX:BMO) says that the average TFSA balance is $41,510, far below the maximum.

Read more »

A glass jar resting on its side with Canadian banknotes and change inside.
Dividend Stocks

Investors: Here’s How to Make $1,000 Each Month in Retirement

Here's how you can easily make $1,000 in monthly passive income in retirement in Canada, without taking on too much…

Read more »

man touches brain to show a good idea
Dividend Stocks

3 No-Brainer TSX Stocks I’d Buy Right Now Without Hesitation

Three TSX stocks that continue to overcome massive headwinds and beat the market are no-brainer buys right now.

Read more »

calculate and analyze stock
Dividend Stocks

TFSA Investors: 2 Top TSX Dividend Stocks to Buy on a Dip and Hold Forever

These top TSX dividend stocks now offer attractive yields and big potential capital gains.

Read more »

grow money, wealth build
Dividend Stocks

1 Dividend Stock to Buy for Growth and Stay for a 5.5% Yield

This dividend stock has been rising higher, but more could certainly be on the way. Now is the time to…

Read more »

A worker uses a double monitor computer screen in an office.
Dividend Stocks

2 Affordable Passive-Income Stocks That Pay Monthly

Are you looking for some passive-income stocks to build a recurring income stream? Here are two great options you can…

Read more »

woman data analyze
Dividend Stocks

Magna International Is Starting to Get Ridiculously Oversold

An undervalued stock with strong fundamentals and visible growth potential is a screaming buy for long-term gains.

Read more »