3 Under-$20 Dividend Stocks with Yields of Over 5%

Given their high yields and attractive valuations, these three under-$20 dividend stocks are excellent buys in uncertain times.

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The U.S. consumer price index (CPI) rose 8.3% in August, above analysts’ expectations of 8.1%. Higher food and shelter prices along with increased expenses related to medical care more than offset the decline in gasoline prices to drive the CPI index higher. With bloated prices continuing to hurt customers, here are three cheap dividend stocks you can buy to boost your passive income. 

Algonquin Power & Utilities

With a tasty dividend yield of 5.3% and an attractive NTM (next 12 months) price-to-earnings multiple of 17.6, Algonquin Power & Utilities (TSX:AQN)(NYSE:AQN) would be my first pick. The company is a low-volatility stock due to its low-risk and regulated business. It serves around 1.2 million customers, meeting their utility needs related to electricity, water, and natural gas.

The company operates several renewable power-generating facilities, with around 82% of the power produced from these facilities sold through long-term power-purchase agreements (PPA). These long-term PPAs shield the company’s financials from price and volume fluctuations, thus delivering stable cash flows and allowing it to raise its dividends at a CAGR (compound annual growth rate) of over 10% for the last 12 years.

Meanwhile, Algonquin Power & Utilities plans to invest around US$12.4 billion over the next five years, expanding its utility and renewable asset base. These investments also cover its strategic acquisitions. Amid these investments, the company’s management hopes to grow its adjusted EPS (earnings per share) at a CAGR of 7-9% through 2026. So, I believe Algonquin Power & Utilities is in an excellent position to continue its dividend growth.

TransAlta Renewables

Amid the facility outage at the Kent Hills wind site and weakness in the broader equity markets, TransAlta Renewables (TSX:RNW) is trading 6.7% lower this year. The correction has dragged the company’s NTM price-to-earnings multiple down to 21.1, lower than its historical average. However, the growing transition towards clean energy is expanding the company’s addressable market.

Meanwhile, TransAlta Renewables focuses on adding capacity and extending its contracts, which could drive its growth in the coming quarters. It also makes strategic acquisitions to expand its footprint and strengthen its market presence. Since 2013, the company has acquired assets worth over $3.4 billion. Further, its long-term PPAs, with a weighted average remaining contractual life of 11 years, provide stability to its financials.

The company currently pays a monthly dividend of $0.07833/share, with its yield for the next 12 months at an attractive 5.57%. So, considering its high yield, attractive valuation, and expanding addressable market, I am bullish on TransAlta Renewables.

NorthWest Healthcare Properties REIT

NorthWest Healthcare Properties REIT (TSX:NWH.UN) would be an excellent addition to your portfolio, given its high dividend yield, stable cash flows, and attractive valuation. The company’s defensive healthcare portfolio, long-term rental agreements, and government-supported tenants, reduce vacancies and increase collection rates, thus delivering robust cash flows. Supported by these healthy and reliable cash flows, the company pays a monthly dividend of $0.0667/share, with its yield at a juicy 6.5%.

NorthWest Healthcare is also expanding its footprint in high-growth markets, including the United States. It recently acquired 27 healthcare facilities in the country for $765 million. Besides, it’s raising funds through secondary offerings and selling its non-core assets to fund its growth initiatives. Despite its stable passive income and high yield, the company trades at an NTM price-to-earnings multiple of 7.3, making it an attractive buy.

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.

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