3 Undervalued TSX Stocks Worth a Buy Right Now

Are you looking for dividend stocks trading for deep value? Here are three TSX stocks that are insanely undervalued right now.

| More on:
Target. Stand out from the crowd

Image source: Getty Images

The S&P/TSX Composite Index has fallen over 11% in 2022, but many TSX stocks are down significantly more. If you’ve got a long period to invest (like five years or more), here are three undervalued dividend-paying stocks that could have considerable upside over the coming five years or more.

Fortis: A safe TSX dividend stock

If you want a long-term, low-risk TSX stock with a nice dividend, Fortis (TSX:FTS) certainly looks interesting today. Its stock is down over 22% this year. Right now, it is trading with a 4.4% dividend yield. That is significantly above its 10-year average dividend yield of 3.8%. The last time its yield was this high was in the March 2020 market crash.

Fortis is not a high growth business. However, its mix of regulated transmission and distribution assets are incredibly defensive. This helps provide relative certainty that Fortis will continue to pay and even grow its earnings and dividend. It already has a 49-year history of growing its dividend annually.

Fortis’s $20 billion capital plan provides a clear outlook for about 6% annual earnings and dividend-per-share growth ahead. With a price-to-earnings (P/E) ratio of 17 times, Fortis is trading on the low-end of its valuation range. For an attractive dividend with stable future growth, this TSX stock is a perfect conservative investment.

Enghouse Systems: Cheap and cash rich

Enghouse Systems (TSX:ENGH) is an interesting TSX technology stock for a combination of income, growth, and value. Its stock is down over 47% this year. Now, its decline is somewhat justifiable, given that its sales and earnings are expected to decline by around 10% this year.

This company’s video-conferencing software was a big winner during the pandemic, so year-over-year comparables have been challenged. Yet its business generates a lot of cash, and it has a pristine balance sheet with over $220 million of investable cash.

Enghouse has a history of growing by smart acquisitions. In fact, over the past decade, its stock is up 400%! It is likely to use the economic downturn to swipe up some value-priced, high-return assets.

This TSX stock could be a big winner out of the current economic decline. It only trades for 10 times EBITDA (earnings before interest, taxes, depreciation, and amortization) and 13 times free cash flow today. It pays a well-covered 2.5% dividend as well.

Northland Power: A top TSX renewable power stock

Northland Power (TSX:NPI) is another high-quality dividend stock trading at a bargain price. While Northland stock is neutral for the year, it has fallen 14% over the past month. Today, it trades with a P/E ratio of 15 and an enterprise value-to-EBITDA ratio of 10. That is near the low-end of its five-year valuation.

The outlook for Northland looks very positive. It operates a large portfolio of renewable power assets in Europe. It should benefit from very strong power pricing in 2022. Last quarter, revenues and EBITDA increased 36% and 22%, respectively.

With energy security a key priority in Europe, Northland is very well positioned to help develop and operate large-scale renewable projects. It has a large 14-gigawatt backlog that should fuel market-leading growth. While they wait, investors can collect an attractive 3.17% dividend (that pays out monthly) that should grow in the coming years.

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 Enghouse Systems Ltd. and NORTHLAND POWER INC. The Motley Fool has positions in and recommends Enghouse Systems Ltd. The Motley Fool recommends FORTIS INC. The Motley Fool has a disclosure policy.

More on Dividend Stocks

A meter measures energy use.
Dividend Stocks

TFSA Investors: 3 Safe Utility Stocks to Buy and Hold for Decades

Here are three top utilities to spend some fresh TFSA cash on in the new year.

Read more »

money cash dividends
Dividend Stocks

TFSA Investors: An Easy Way to Boost Your Payouts to $350 Per Month

Because of the tax-free nature of the TFSA, investors have several advantages, especially when buying high-quality dividend stocks.

Read more »

STACKED COINS DEPICTING MONEY GROWTH
Dividend Stocks

TFSA Passive Income: Earn $126/Month Tax Free for Decades

Do you seek passive income? Leverage your TFSA to earn a solid tax-free passive income through these stocks.

Read more »

lab worker inspects test tubes
Dividend Stocks

Warren Buffett’s Buying This Passive Income Stock

Berkshire began buying this chemical company earlier this year and hasn't stopped.

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

Need Passive Income? Turn $5,000 Into $23.85 Every Month

If you're looking for passive income that comes in like a paycheque, this dividend stock provides that to you along…

Read more »

Silver coins fall into a piggy bank.
Dividend Stocks

A TFSA Contribution Room of $88,000 and 1 Dividend Aristocrat Can Make You $172,330 Richer

A high-yield Dividend Aristocrat in the energy sector is a suitable holding for Canadians with $88,000 available contribution rooms in…

Read more »

Dollar symbol and Canadian flag on keyboard
Dividend Stocks

2 Dividend Stocks to Buy Now Under $50

Here are two of the best under-$50 dividend stocks you can buy in Canada right now.

Read more »

TELECOM TOWERS
Dividend Stocks

If I Could Only Buy 1 Stock Before 2023, This Would be it!

If you could buy 1 stock before 2023, what would it be? Here’s the stock I’m considering, and I think…

Read more »