Passive Income: 2 High-Yield Stocks to Watch Out for in 2022

Manulife Financial (TSX:MFC)(NYSE:MFC) and Canadian Natural Resources (TSX:CNQ)(NYSE:CNQ) are high-yield stocks that reek of value in 2022.

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Passive-income investors still have a lot of high-yield stocks and REITs to choose from going into the new year. While valuations across the board may be suspect, there are hidden gems out there, especially in the less-loved areas of the market.

Specifically, REITs and other utilities, which have been passed up for hotter, growthier names, may be compelling additions to any watchlist going into 2022. The next year will be challenging, and volatility should be expected. That said, sector-based rotations and behind-the-scenes volatility could continue while broader indices remain steady. Such an environment gives investors a bit of an incentive to pick their own investments. And in this piece, we’ll look at two passive-income plays with high-yield dividends that are well supported and likely to grow further over the coming years.

Consider Manulife Financial (TSX:MFC)(NYSE:MFC) and Canadian Natural Resources (TSX:CNQ)(NYSE:CNQ), two of many high-yield stocks to consider as a part of a passive-income portfolio.

Manulife Financial

Manulife Financial is a Canadian life insurer that looks incredibly cheap at just 7.1 times trailing earnings. Investors doubt that 2022 will be a good year for the insurer. While several medium-term headwinds will persist in 2022, I think long-term thinkers have a lot to gain by punching their ticket into the name here. The exciting long-term tailwinds are still at play, and they’ll begin to kick in gradually as COVID headwinds start to fade. The Asian business is still worth getting behind, despite the recent slowdown.

The stock has not delivered much of anything over the past five years, up just 1% over the timespan. Moving ahead, only patient, long-term investors are likely to make considerable capital gains from the name. That said, I think the dividend is more than enough of an incentive for most investors to hold through further volatility. Manulife stock is no value trap. It looks like deep value, but it’s deep value that’s unlikely to reward investors looking to make a quick buck.

Canadian Natural Resources

The oil rally has been remarkable, with WTI (West Texas Intermediate) prices blasting off past the US$75 mark, an unthinkable level when oil sank earlier in 2020. Canadian Natural, the new king of the Albertan oil sands, has been flexing its muscles, up 72% year to date and finally breaking out to a new all-time high of around $54 per share.

Undoubtedly, demand for oil could cause one last boom that could see WTI rise above US$100. In such a world, there’s no telling how much CNQ stock can fly, as it looks to ramp up production. Despite the incredible rally, CNQ stock is dirt cheap at 10.8 times trailing earnings.

The 4.4% dividend yield is bountiful and is well positioned to grow at a double-digit annualized rate if oil remains robust moving forward. With a “B” CDP score, Canadian Natural is a fossil fuel play that’s more ESG friendly than some of its rivals. Despite this, many ESG investors are likely to continue shunning the name in spite of its more favourable environment. At the end of the day, though, it’s all about cash flows. And for value seekers, it’s tough to top the senior fossil fuel play as momentum builds.

Indeed, it’s rare to have such a high-yield stock be at the intersection between value and momentum. So, if you lack commodities exposure, now is as good a time as any to consider CNQ, one of the highest-quality plays in the space 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 Joey Frenette has no position in any of the stocks mentioned. The Motley Fool recommends CDN NATURAL RES.

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