1 Oversold Dividend Stock (Yielding 8.5%) to Buy Before the New Year

This oversold dividend stock doesn’t deserve the share price it has today, which is why now is the best time to buy and lock up its ultra-high yield.

Amy Legate-Wolfe

Author Bio Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Her work can also be found at Canada's National Observer, where she writes on the business side of climate action. Before joining Motley Fool Canada, Amy wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Social Media Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published December 23, 2022 2:00 pm EST

| More on: RNW

Many companies are spiralling downwards these days. However, not every one of these companies could be considered oversold. Oversold happens when companies go far below their fair value, offering an opportunity for investors. Especially if it’s a dividend stock.

So that’s why today I’m going to discuss one oversold dividend stock investors should consider. Not only has it fallen far below value, but you can gain access to a dividend while you wait for an eventual rebound. And it will eventually rebound.

A lake in the shape of a solar, wind and energy storage system in the middle of a lush forest as a metaphor for the concept of clean and organic renewable energy. — Source: Getty Images

TransAlta Renewable

TransAlta Renewable (TSX:RNW) has been hit with problem after problem this year, at a time when the company really couldn’t afford with a recession coming in. RNW stock had enough problems in 2021, with a turbine collapse at its New Brunswick wind farm leading to a closure and replacement of the 50 towers.

More problems came up this quarter, when RNW stock announced it saw, “lower than expected wind resource.” Plus, rising interest rates and competition have led RNW stock to put its cash aside for its dividend, rather than growth opportunities, ahead of a potential recession.

Shares of RNW stock fell sharply by 23% after the news on Dec. 14, and have remained down since. However, RNW stock is now in oversold territory, trading at a relative strength index (RSI) of 21.75! That’s far below the oversold mark of 30.

Get in now

So there’s some bad news happening for RNW stock, but frankly, it’s nothing that other companies aren’t facing themselves. And I mean companies in general, not just clean energy. But since RNW stock is in the clean energy sector, it actually has a far more likely chance to recover than those companies in other sectors.

Especially RNW stock, as this stock has a number of operations across renewable energy sectors. This includes renewable gas, where RNW stock can look to higher gas prices for a boost to income while it transitions to fully clean energy when the time comes.

Clean energy growth is not just coming, it’s here. While there are problems to be fixed at the present, those problems also create opportunities for the investor willing to wait it out. Meanwhile, you can lock up a much higher dividend yield with shares so low.

Bottom line

Investors will eventually figure out that they need to pick up this oversold dividend stock. It’s going to happen. When it does, you may end up kicking yourself that you didn’t lock up shares when they traded so low. RNW stock now offers an 8.46% dividend yield as of writing, and should shares recover soon to 52-week highs, that’s a potential upside of 78% as of writing.

While growth may take a little while, you can at least rest easy that RNW stock is using its cash to support that dividend. And remember, it’s not about timing the market, but time in the market. So if you’re willing to buy low today, you should be able to sell high when clean energy fully takes over the energy sector.