Passive Income: These 3 Stocks Just Became Incredibly Cheap

If you are not afraid to be a contrarian, there are tonnes of cheap stocks with elevated dividends. Here are three cheap stocks for passive income.

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If you want to buy passive-income stocks, now is the perfect time. Even quality dividend-paying stocks have started to sell off. As prices pull back, the cash dividend returns on your cost basis (or also known as the yield) increases. Often, this is a part of the market valuing higher risk (and potentially lower returns) on the stock.

In the short term, this is certainly a risk. However, if you can be a contrarian and afford a long investment timeline, you can pick up some stocks with elevated dividends and attractive valuations today. Here are three passive-income stocks that look very cheap right now.

A tech stock for passive income

Sylogist (TSX:SYZ) is a Canadian technology stock trading with a 7.5% dividend yield today. It is not often you can find a tech stock with such a high dividend. However, after a 50% decline in 2022, this stock looks very cheap.

Sylogist provides mission-critical enterprise software solutions for municipalities, education institutions, and charities. It generates high earnings margins and attractive recurring revenues that support its dividend.

This company is completing a turnaround strategy. It has a new CEO and is investing to grow and sustain its long-term earnings potential. It’s a case of short-term pain for long-term gain.

It trades with an enterprise value-to-EBITDA (EV/EBITDA) ratio of 9.5. This passive-income stock hasn’t been this cheap since the March 2020 crash. While this stock has its risks, it could also have significant upside when market sentiment recovers.

A growth stock for passive income

Another small-cap growth stock with an attractive passive-income stream is goeasy (TSX:GSY). At $98 per share, goeasy stock has lost 45% of its value this year. Today, it only trades for 7.5 times earnings. Likewise, it pays out a 3.7% dividend yield. That is far above its five-year average yield of 1.99%.

goeasy is one of Canada’s largest non-prime lenders. Given the stock market is worried about a recession and rising interest rates, most financial stocks have pulled back. goeasy had a stunning year of growth last year. Consequently, comparable results in 2022 might be challenged.

Despite that, the company has handled several economic downturns before. Over 17 years, this passive-income stock has still earned a 700% capital return. It has a history of strong double-digit dividend growth. If you can look past the current concerns, this could be an incredible buying opportunity.

A real estate stock with a high yield

On fears of interest rates increasing, real estate stocks have pulled back severely. While this is concerning, many of these stocks have long-dated debt that is locked in with very low rates. Consequently, rising interest rates have only limited impact on their cash flows (at least in the near term).

One passive-income stock that looks interesting today is Dream Industrial REIT (TSX:DIR.UN). It owns a large portfolio of industrial properties across North America and Europe. These are well-located properties with a mix of diverse tenants and uses.

Currently, it is yielding 5.87%! It pays a $0.05833 distribution every month. It has been earning around 10% annual cash flow per unit growth over the past several years.

Likewise, it has a very good balance sheet with very low-debt and fixed low interest rates. Yet it is one of the cheapest industrial real estate stocks you can find. For modest growth, income, and value, this is a solid pick for the long term.

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 positions in DREAM INDUSTRIAL REIT and goeasy Ltd. The Motley Fool recommends DREAM INDUSTRIAL REIT.

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