2 Bargain Stocks You Can Buy Today and Hold Forever

These top Canadian dividend stocks look cheap right now for buy-and-hold investors.

| More on:
grow money, wealth build

Image source: Getty Images

Buying stocks during a market correction takes courage, but the long-term rewards can be significant for patient investors. One popular strategy involves buying top TSX dividend stocks and using the distributions to acquire new shares. Investors seeking to develop a dividend reinvestment strategy may want to indulge in these two Canadian dividend aristocrats while they are undervalued.

Bank of Montreal

Bank of Montreal (TSX:BMO) (NYSE:BMO) has unquestionably earned its crown as a dividend aristocrat – a company that has paid out a consisent and increasing dividend for at least 25 years. BMO paid its first dividend in 1829. Since then, investors have received a piece of the profits every year. Bank of Montreal raised the dividend by 25% late in 2021 and then hiked the payout by another 4.5% when the bank reported fiscal Q2 2022 results.

This would suggest the management team is comfortable with the profits outlook. Investors, however, aren’t convinced. The stock is down from a 2022 high of $154 to the current price near $121 per share.

Recession fears are building as persistent inflation and aggressive rate hikes combine to hit household and business budgets. People are using more of their discretionary income to cover expenses for essential goods. Some are now dipping into savings. This trend is expected to continue as mortgage holders face higher rates on renewals.

While an economic downturn is expected, the general consensus is for a mild and short recession. With that though in mind, the pullback in Bank of Montreal’s share price looks overdone.

The bank is spending big bucks to drive future growth in the United States. Bank of Montreal is buying Bank of the West for US$16.3 billion in a deal that will add more than 500 branches to the existing American operations. Bank of the West gets 70% of its deposits from customers in California, so the deal gives Bank of Montreal a strong foothold in the state.

Investors who buy BMO stock at the current level can puck up a decent 4.6% yield. A $10,000 investment in BMO stock 25 years ago would be worth more than $100,000 today with the dividends reinvested.

Fortis

Fortis (TSX:FTS) (NYSE:FTS) raised its dividend in each of the past 48 years. The company grows revenue and profits through a combination of strategic acquisitions and development projects. Fortis hasn’t done a large deal for more than five years, but it wouldn’t be a surprise to see another acquisition emerge in the near term. The company added a mergers and acquisitions specialist to the leadership team in 2021.

Fortis is currently working on a $20 billion capital program that will increase the rate base by more than $10 billion to above $41 billion by the end of 2026. This will drive revenue and cash flow growth that management says will support planned dividend hikes of about 6% per year through 2025.

Fortis stock trades near $56 at the time of writing compared to a 2022 high around $65. The company gets 99% of its revenue from regulated assets such as power generation plants, electricity transmission networks, and natural gas distribution businesses. These are essential services that are required regardless of the state of the economy.

A $10,000 investment in Fortis stock 25 years ago would be worth about $160,000 today with the dividends reinvested.

The bottom line on cheap stocks to buy now

Bank of Montreal and Fortis pay good dividends that should continue to grow. If you have some cash to put to work in a portfolio focused on passive income and total returns, these stocks look cheap right now and deserve to be on your radar.

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 FORTIS INC. The Motley Fool has a disclosure policy. Fool contributor Andrew Walker owns shares of Fortis.

More on Dividend Stocks

rain rolls off a protective umbrella in a rainstorm
Dividend Stocks

Building a $50,000 Portfolio That Can Weather Any Market Storm

This defensive investment portfolio uses three ETFs to ride out any recession.

Read more »

a person watches a downward arrow crash through the floor
Dividend Stocks

Top 3 TSX30 Winners: Understanding the Recent Stock Drop

Three TSX30 winners in 2024 have experienced price drops this year and continues to underperform due to massive headwinds.

Read more »

space ship model takes off
Dividend Stocks

Where to Put $12,000 in Today’s Market for Potential Long-Term Gains

There's no shortage of great investments that can provide potential long-term gains. Here's a look at three stellar options.

Read more »

Canadian dollars are printed
Dividend Stocks

How to Use $10,000 to Transform a TFSA Into a Cash Machine

Do you want growth and income? Consider these top investments that offer up monthly income in spades!

Read more »

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

Building a $28,000 TFSA Portfolio One Contribution at a Time

Let’s take a look at how you can turn a $28,000 investment in a TFSA into a life-changing fund for…

Read more »

senior relaxes in hammock with e-book
Dividend Stocks

Making Your $25,000 TFSA Investment Work Harder for the Long Term

This strategy reduces risk while still providing a solid return.

Read more »

Asset Management
Dividend Stocks

TFSA: 3 Canadian Stocks to Buy and Hold for a Lifetime

Want to build wealth in your TFSA? Then these three Canadian stocks are some of the best options out there.

Read more »

Canadian Dollars bills
Dividend Stocks

Invest $20,000 in a TSX Stock, Create $1,278.98 in Passive Income

Are you worried about the future? Then consider a reliable dividend stock like this top choice.

Read more »