With a low stock price comes high dividend yields. In the stock market, red signifies a time to buy, and green signifies a time to sell. The market colour is red today, and it’s time to buy high-growth dividend stocks at a heavy discount. You will regret not buying them today, before a rally reduces the dividend yield.
Algonquin Power & Utilities: The dividend powerhouse
A utility stock is a dividend powerhouse. A company needs regular free cash flow to pay dividends. With electricity and gas bills rising, cash flows are increasing for utility companies. But Algonquin Power & Utilities (TSX: AQN) stock is down 21% from its average trading price. A stock price below $15 is an attractive buy point for this dividend powerhouse. As a mid-cap stock, Algonquin doesn’t appear in the league of dividend aristocrats. But the company has paid regular quarterly dividends since 2011 and increased them annually at a compounded annual growth rate (CAGR) of 10%.
The bear market has pulled down the stock price to March 2019 levels and inflated the dividend yield to 6.67%. The stock price is falling as Algonquin is in the middle of acquiring Kentucky Power and transitioning to green energy. Moreover, oil and gas have caught the attention of investors amidst the global energy crisis. For certain, the winter season will be bullish for Algonquin as electricity consumption increases, bringing higher cash flow till mid-February.
If you buy the stock now through your Tax-Free Savings Account, you can lock in capital appreciation of 42-47% and a yield of over 6%. In dollar terms, a $250 investment can grow to $355 + $12.20 in annual passive income.
Enbridge: A stock every dividend lover holds
While Algonquin is a relatively young stock, Enbridge (TSX: ENB) is a veteran in the energy space, paying dividends since the 1960s. Your parents are probably living off their retirement from Enbridge’s dividend. It earns cash from the toll money it collects for transmitting oil and gas through its pipeline infrastructure, which connects Canada to the United States.
The Russia-Ukraine war has created a new opportunity for North American liquefied natural gas (LNG) exports as Europe has stopped buying gas from Russia. Enbridge is looking to tap a 30% share of the LNG export market with its upcoming projects. The LNG opportunity will drive Enbridge’s future dividend growth.
The fear of a recession and rising interest rates does make investors wary of high-debt companies. But Enbridge has a low-risk model, wherein 90% of its debt is fixed rate and 98% of its cash flows are underpinned by contractual agreements. Its third-quarter distributable cash flow surged 10%, hinting at a 7-8% increase in dividend in December (up from 3% dividend growth in the last two years).
Enbridge stock is trading at a 10% discount from its June high, which has inflated its dividend yield to 6.47%. The stock is trading in the middle of its 52-week low and high. ENB stock is still a buy ahead of the December hike, CEO transition, and peak of winter.
BCE: A stock with long-term growth
BCE (TSX: BCE) diversifies your exposure to the steady dividends of the telecom sector and growth of the 5G revolution. BCE’s accelerated capital program is showing results. The company reported its highest net additions of mobile phones (64% growth) and fibre-to-the-home (36.3% growth) in the third quarter. It is just the beginning as the fifth generation technology unfolds artificial intelligence at the edge. However, the bear market has put BCE stock at 2019 levels and inflated dividend yields by close to 6%.
BCE’s free cash flow surged 13.4% in the third quarter. The cash flow will continue to surge, giving the company enough liquidity to keep growing dividends. This stock can give you 40–50% growth in the long term.
How to enhance your returns?
By buying the above three stocks now, you can lock in over 6% yield and enjoy dividend growth. You can enhance your returns by reinvesting these dividends in the same stock or in a growth stock. A $100 dividend withdrawn is $100, but if invested wisely can become $200.
