4 Insanely Cheap Canadian Stocks to Buy for Passive Income

The recent bear market has created some incredible bargains, especially for those looking for passive income. Here are four cheap stocks to consider.

sale discount best price

Image source: Getty Images

If you want to earn passive income, there continue to be some attractive bargains in the stock market today. You may need to be a contrarian and look past the current economic challenges, but there could be significant upside both in passive income and capital returns. Here are four cheap Canadian stocks that pay attractive dividends and look very cheap right now.

A renewable power stock for growth and passive income

Northland Power (TSX:NPI) is a Canadian leader in offshore wind power development. It also has a diverse portfolio that includes a utility in Colombia, and wind, solar, and natural gas facilities in North America and Europe. It operates three gigawatts (GW) of renewable power today, but it has a project development backlog that is nearly double its current power capacity.

Today, Northland stock only trades with an EV/EBITDA (enterprise value-to-earnings before interest, tax, depreciation, and amortization) ratio of 12. That is below its 10-year average of 14.5. Likewise, it pays an attractive 3.23% dividend yield. For growth and income, this is an attractive stock if you have a long-term investing mindset.

A utility not getting its proper value

AltaGas (TSX:ALA) operates a natural gas utility business in the U.S. and an integrated midstream energy business in Canada. The utility is growing at an attractive high-single digit rate, and the midstream business has been profiting from recent elevated energy prices.

Over the past few years, AltaGas has drastically cleaned up its balance sheet and seriously focused its operations. This has resulted in more consistent and predictable earnings growth.

Despite its outlook continuing to improve, AltaGas trades at a discount to both its utility and midstream peers. It trades with a price-to-earnings (P/E) ratio of 13.5 right now. This passive-income stock pays a very attractive 4.6% dividend yield, and it just raised its dividend (again) in late 2022.

An energy stock with a big yield

Another energy stock that continues to be very cheap is Whitecap Resources (TSX:WCP). It produces around 160,000 barrels of oil equivalent per day across Alberta and Saskatchewan. As with many other energy stocks, the company has been enjoying a cash flow windfall from strong energy prices.

The company is focused on drastically reducing its debt levels. Currently, it sits with $1.8 billion of net debt, but when it hits $1.3 billion in mid-2023, it plans to increase its quarterly dividend to $0.15 per share (a 26% increase).

Right now, this passive-income stock trades for a cheap 5.3 times earnings and 5.2 times free cash flow. It pays a substantial 5.2% dividend yield, which could get much richer if it hits debt targets in 2023.

A cheap REIT for passive income

If you don’t like energy, real estate might be an interesting asset class to consider. Many real estate stocks have dropped recently, presenting attractive valuations and higher-than-normal yields. European Residential Real Estate Investment Trust (TSX:ERE.UN) is intriguing for many of these reasons.

It owns a large portfolio of residential properties in the Netherlands. The Netherlands has high immigration, low housing supply, and limited land for development. This creates very attractive fundamentals (like high occupancy and strong rental rate growth) for an apartment REIT.

The stock is down 15% over the past year, despite it delivering very strong results. It pays a well-covered 4.7% dividend yield and trades at a meaningful 40% discount to its net asset value. If you can be comfortable with European exposure, this is an excellent value-priced stock to buy for passive income.

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 European Residential Real Estate Investment Trust and Northland Power. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Growing plant shoots on coins
Dividend Stocks

3 Magnificent Ultra-High-Yield Dividend Stocks That Are Screaming Buys in April

High yield stocks like BCE (TSX:BCE) can add a lot of income to your portfolio.

Read more »

grow money, wealth build
Dividend Stocks

1 Growth Stock Down 24% to Buy Right Now

With this impressive growth stock trading more than 20% off its high, it's the perfect stock to buy right now…

Read more »

Dividend Stocks

What Should Investors Watch in Aecon Stock’s Earnings Report?

Aecon (TSX:ARE) stock has earnings coming out this week, and after disappointing fourth-quarter results, this is what investors should watch.

Read more »

Freight Train
Dividend Stocks

CNR Stock: Can the Top Stock Keep it Up?

CNR (TSX:CNR) stock has had a pretty crazy last few years, but after a strong fourth quarter, can the top…

Read more »

Hand arranging wood block stacking as step stair with arrow up.
Dividend Stocks

3 Stocks Ready for Dividend Hikes in 2024

These top TSX dividend stocks should boost their distributions this year.

Read more »

pipe metal texture inside
Dividend Stocks

TC Energy Stock: An Undervalued 7.8% Dividend Stock

TC Energy stock appears to be trading at a discount of about 20%.

Read more »

Man data analyze
Dividend Stocks

1 Dividend Stock Down 13% to Buy Right Now

Parkland (TSX:PKI) stock may be down by 13%, but shares are still way up in the last year. So, this…

Read more »

Senior Couple Walking With Pet Bulldog In Countryside
Dividend Stocks

TFSA 101: How Pensioners Can Earn $4,987.50 Per Year in Tax-Free Passive Income

Retirees can use this TFSA strategy to boost portfolio yield while reducing risk.

Read more »