3 High-Yield Stocks That Still Have Upside to Buy in January 2023

Manulife Financial (TSX:MFC) stock trades at a hefty discount to the broader market.

| More on:
Increasing yield

Image source: Getty Images

The turbulent bear market has been dreaded by many, but for value investors who aren’t planning to retire within the next five years, the seemingly hostile environment seems perfect for bargain hunting. There’s a lot of value out there, depending on where you look. Undoubtedly, there are a number of value “traps” that may not be headed higher anymore soon, as recession headwinds come storming in.

In this piece, we’ll look at three cheap dividend payers that could have a solid 2023. They’ve been uneventful. But all it takes is one truly unexpected bit of good news for this bear market to come to a soaring end. Now, nobody knows when or how the bear will end. But we do know that long-term investors will be around to see better days. That alone is enough to stay invested and look out to the longer term (think the next 15 years!).

IA Financial

IA Financial (TSX:IAG) is an intriguing insurer that doesn’t get as much coverage as it Canadian peers. Undoubtedly, IA is more of a mid-cap stock ($8.4 billion market cap) than its peers. And with a modest 3.35% dividend yield, the name isn’t the first choice of passive-income seekers. Regardless, I’m a big fan of management and their ability to weather a storm.

You see, insurance can be a tough place to be in a recession year. IA is a prudently managed firm that doesn’t tend to get clobbered as badly as some of its peers. Indeed, IA’s wealth management business has picked up steam in recent years and has helped the firm stand out in the pack. The stock trades at 10.78 times trailing price to earnings (P/E). That’s pretty cheap for such a well-run mid-cap that I think it looks undervalued relative to the peer group.

Manulife Financial

Sticking with the insurers, Manulife Financial (TSX:MFC) is more of a go-to non-bank financial. And it’s not hard to see why. The Asian growth prospects, large dividend (5.2% yield), and discount relative to peers (6.7 times trailing P/E at writing) make Manulife a very attractive name to value-hungry Canadians.

It’s been a choppy and rather uneventful ride over the past five years, though. Undoubtedly, the life insurer has a lot of sensitivity to the state of the world economy. In any case, I remain a fan of MFC stock over the longer term for its more attractive growth traits. The Asian market could help propel MFC stock above and beyond its peers. Once the recession ends, I’d look for MFC stock to start outpacing its less-growthy peers.

Bank of Montreal

Bank of Montreal (TSX:BMO) isn’t just another Big Six Canadian bank, it’s one that’s made huge strides to improve its presence (and growth prospects) in the U.S. market. Indeed, Bank of Montreal has done a sound job of prudently acquiring its way into U.S. banking over the years. Looking into the future, I expect its U.S. push will pay huge dividends, as it looks to grow further beyond its home turf.

For now, BMO stock will feel the pain of recession. Loan losses and slowed growth could linger for some time. At 6.5 times trailing P/E, with a 4.4% yield, I’d look to buy and hold the name, as it continues to fluctuate. At the end of the day, BMO is a prudently run bank that will find a way to build value for investors.

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 Joey Frenette has positions in Bank Of Montreal. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Investing

online shopping
Investing

Ring! Ring! Serious Yield Calling at These 3 Telecom Stocks

BCE (TSX:BCE) and other high-yield telecoms worth watching as their yields soar further.

Read more »

Piggy bank with word TFSA for tax-free savings accounts.
Dividend Stocks

TFSA Maxed Out? Here Are 5 Other Ways to Grow Your Wealth in Canada

Canadians have other options to grow wealth after maxing out their TFSA contribution limits.

Read more »

A man smiles while playing a video game.
Dividend Stocks

RRSP: 2 High-Yield Dividend Stocks to Consider Now

These top TSX dividend stocks offer attractive yields today for RRSP investors.

Read more »

edit Sale sign, value, discount
Dividend Stocks

2 Bargain Stocks You Can Buy Today and Hold Forever

These two stocks are reliable and trade ultra-cheap, making them among the best TSX stocks to buy now and hold…

Read more »

Person holds banknotes of Canadian dollars
Dividend Stocks

Top 3 Dividend Stocks Yielding Over 7% to Buy in June 2024

Are you looking for the best of the best dividend stocks? These three are the ones that belong on your…

Read more »

Online shopping
Tech Stocks

Up 42% from 52-Week Lows, Is Shopify Stock Still a Buy?

Shopify (TSX:SHOP) stock looks like one of Canada's best growth stocks. And right now, it looks like it's on sale,…

Read more »

Payday ringed on a calendar
Dividend Stocks

This 8.9 Percent Dividend Stock Pays Cash Every Month

You can forget about risks related to short-term market volatility and buy this high-yield monthly dividend stock to expect solid…

Read more »

Dividend Stocks

RRSP Investors: Buy These Top Dividend Stocks for Total Returns

RRSP investors can consider adding blue-chip dividend stocks such as Tourmaline Oil to their equity portfolios in 2024.

Read more »