Got $1,000? Buy These 3 Cheap Dividend Stocks

These three dividend stocks could strengthen your portfolio and deliver stable passive income.

| More on:

Image source: Getty Images

The strong pullback in the equity markets appears to be fizzling out, as the S&P/TSX Composite Index closed in red for the last two consecutive days. The fear that aggressive interest rate hikes by the Federal Bank of the United States could slow global growth has made investors skeptical, leading to a pullback.

Amid rising volatility, here are three cheap Canadian dividend stocks that you can buy to strengthen your portfolio and earn a stable passive income.

TC Energy

First on my list is midstream energy company TC Energy (TSX:TRP)(NYSE:TRP). It earns over 95% of its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) from long-term contracts or regulated assets, thus delivering stable financials irrespective of the economy. Supported by these regulated assets, the company has posted an average shareholder return of over 13% since 2000. Also, it has raised its dividends at a CAGR (compounded annual growth rate) of above 7% for the previous 22 years. Its yield for the next 12 months stands at 5.53%.

Despite its solid returns, TC Energy trades at an attractive NTM (next 12-month) price-to-earnings multiple of 15.9. The company is progressing with its $28 billion secured capital program while expecting to put $6.5 billion of projects into service this year. These investments could drive its adjusted EBITDA at a CAGR of over 5% through 2026. Amid the expectation of higher cash flows, TC Energy’s management hopes to raise its dividends at a 3-5% rate in the next few years.

Algonquin Power & Utilities 

Another excellent dividend stock to add to your portfolio is Algonquin Power & Utilities (TSX:AQN)(NYSE:AQN). The utility company, which is also involved in the renewable power-generation business, has been raising its dividend for the previous 12 years at a CAGR of over 10%.

The company sells around 82% of the power produced from its renewable facilities through long-term power-purchase agreements, thus shielding its financials from price and volume fluctuations. Its low-risk utility businesses provide reliable cash flows, allowing the company to raise its dividend consistently. With a quarterly dividend of US$0.18, the company’s yield for the next 12 months stands at a healthy 5.1%.

Meanwhile, the company’s planned capital investment of US$12.4 billion through 2026 could drive its rate base at a CAGR of 14.6%. So, the company’s management expects its adjusted earnings per share to grow at an annualized rate of 7-9% in the coming five years, thus allowing the company to continue its dividend growth. Despite these growth initiatives, stable cash flows, and healthy dividend yield, Algonquin Power & Utilities trades at an attractive NTM price-to-earnings multiple of 18.4.

NorthWest Healthcare Properties REIT

My final pick is NorthWest Healthcare Properties REIT (TSX:NWH.UN), which pays a monthly dividend of $0.0667/share, with its yield for the next 12 months at 6.14%. The REIT owns and operates highly defensive healthcare properties across eight countries. Its long-term agreements with tenants, inflation-indexed rent, and government-backed tenants have allowed the company to enjoy a high occupancy rate, which stood at 97% in the recently posted June-ending quarter.

Meanwhile, the company has strengthened its asset base with acquisitions of $934 million this year. It continues to look for new investment opportunities to expand its presence in the United Kingdom, Australia, New Zealand, Germany, and Canada. So, given these growth initiatives and stable cash flows, I believe NorthWest Healthcare’s dividend is safe. Meanwhile, the company’s valuation also looks attractive, with its price-to-earnings multiple at 7.7.

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 NORTHWEST HEALTHCARE PPTYS REIT UNITS. Fool contributor Rajiv Nanjapla has no position in any of the stocks mentioned.  

More on Dividend Stocks

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Dividend Stocks

3 Canadian Dividend Stocks to Buy Hand Over Fist

These three Canadian dividend stocks each offer a unique opportunity, making them some of the best investments to buy at…

Read more »

A person builds a rock tower on a beach.
Dividend Stocks

Retirement Wealth: 2 Oversold Canadian Stocks to Buy Now and Own for Decades

These industry-leading dividend stocks look cheap right now and have increased their distributions annually for decades.

Read more »

Tired or stressed businessman sitting on the walkway in panic digital stock market financial background
Dividend Stocks

2 of the Safest TSX Stocks Right Now

The stock market is heading towards a crash. Investors are seeking the safety of dividends, and these two stocks provide…

Read more »

Payday ringed on a calendar
Dividend Stocks

Want Monthly Passive Income? Try These TSX Dividend Payers

In need of extra cash? These dividend stocks offer passive income each month, and you can pick them up cheap…

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

Want Safe Passive Income? Here Are 2 TSX Dividend Aristocrats for New Investors

Need some safe passive income? TSX Dividend Aristocrats like Fortis (TSX:FTS) are ideal stocks for new investors to hold in…

Read more »

grow dividends
Dividend Stocks

2 Cheap TSX Dividend Stocks to Buy Now

These top TSX dividend stocks now offer 6% yields.

Read more »

Piggy bank next to a financial report
Bank Stocks

Got $500? Create Passive Income of $500 in Just 33 Years

Only have a bit of cash to invest? By investing in the right stock, you could make $500 in annual…

Read more »

calculate and analyze stock
Dividend Stocks

2 Top TSX Dividend Stocks to Buy Now for a Self-Directed TFSA or RRSP

Top TSX dividend stocks are now trading at attractive prices for TFSA and RRSP investors.

Read more »