End-of-Year Blowout: 3 Stocks Still on Sale for Now

Don’t miss this year-end blowout sale and get a solid mix of value, income, and growth across these three dividend stocks!

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Here’s an end-of-year blowout sale across a few TSX stocks! They’re cheap now for a variety of reasons, but if you have an investment horizon of three to five years, you should become wealthier by diversifying your money across these picks.

A cheap retailer with a decent dividend

Canadian Tire (TSX:CTC.A) stock has been beaten down over 21% this year. This is due to a number of reasons, including higher inflation and operating expenses and the fact that it primarily sells durable goods.

As an example of a higher operating expense, year to date (YTD), the retailer saw its selling, general, and administrative expenses rising 9.2% year over year to $3.02 billion. So, despite retail sales rising 7.3% in the period, its diluted earnings per share still declined 14.8% to $8.59.

Durable goods simply don’t sell as well during higher inflationary environments. Consumers delay these purchases if they can help it because they have more urgent spending such as rent/mortgage and groceries. Additionally, many economists believe we’ll enter a recession next year. This also doesn’t bode well for the sale of durable goods.

At about $142 per share at writing, the retail stock trades at below 8.4 times next year’s earnings. Because of low expectations of earnings next year, it trades at a low valuation versus its historical levels. This is a recessionary-level bargain!

The value stock’s trailing 12-month (TTM) payout ratio is about 30%. Still, Canadian Tire instilled investor confidence by increasing its quarterly dividend by 6.2% this month. Because of the correction in the stock, it now offers a respectable dividend yield of 4.85%.

CIBC stock

A year-end blowout sale is also seen at some of the big Canadian bank stocks. For instance, Canadian Imperial Bank of Commerce (TSX:CM) is a fabulous buy now, offering a juicy dividend yield of over 6%. Investors can park long-term capital here and expect stable dividend growth and price appreciation over time.

Like Canadian Tire, CIBC pays an eligible Canadian dividend that’s favourably taxed in non-registered accounts. In fact, if you’re in a low tax bracket, you may pay zero taxes on your dividend income.

Of course, the bank stock is also pressured by the upcoming recession next year and a potentially higher-risk housing market, as interest rates have gone up.

The value stock has declined 24% this year. At $55.84 per share, CIBC stock trades at approximately 8.1 times next year’s earnings. Its TTM payout ratio is sustainable at 49%.

A resilient growth stock

Alimentation Couche-Tard (TSX:ATD) is a very well run company. The retail stock is actually 16% higher YTD, which is nice to see in a sea of blood in the stock market this year.

As a convenience store consolidator with most locations offering road transportation fuel, it is an essential type of business. Importantly, management continues to see growth opportunities organically and with acquisitions.

Its five-year return on equity of 23% is absolutely amazing and why the stock has done so well in the period, returning 14% total returns annually, which was 1.36 times the Canadian stock market returns.

At $61.49 per share, Couche-Tard is still a good value. Analysts believe it trades at a discount of 12%.

“It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”

Warren Buffett

The Foolish investor takeaway

Buying opportunities won’t last forever! The three dividend stocks, which are on sale now, provide a good mix of value, dividend, and growth that can result in decent long-term returns.

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 Kay Ng has no positions in any stocks mentioned. The Motley Fool has positions in and recommends Alimentation Couche-Tard. The Motley Fool has a disclosure policy.

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