After a tough last year, the Canadian equity markets have made a solid beginning to 2023, with the S&P/TSX Composite Index rising 6.9%. Despite the recent improvement, few stocks are trading at a substantial discount from their 52-week highs. The following three dividend stocks are trading at over a 30% discount from their 52-week highs, thus offering excellent buying opportunities for income-seeking investors.
Algonquin Power & Utilities
Algonquin Power & Utilities (TSX: AQN), which has taken a severe beating in the last few months, is my first pick. Rising interest rates, high net losses in the recently reported third-quarter earnings, and lower earnings guidance appear to have dragged its stock price down. Amid the challenging environment, the company cut its quarterly dividends by 40% to US$0.1085/share. Despite the dividend cut, its yield for the next 12 months stands at a healthy 5.95%.
Despite the U.S. Federal Energy Regulatory Commission (FERC) denying the approval to acquire Kentucky Power, AQN is continuing its acquisition efforts. The company sells around 80% of its power produced from its renewable assets through long-term contracts, which provides visibility on its future earnings. It is also working on lowering its debt through asset sales. Also, its solid track record and attractive NTM (next 12-month) price-to-earnings ratio of 12.2 make AQN an attractive buy in this volatile environment.
TransAlta Renewables
TransAlta Renewables (TSX: RNW) has lost 36.9% of its stock value compared to its 52-week high amid the rising interest rates and weakness in the renewable energy space. The company operates a diversified portfolio of hydro, wind, solar, and natural gas facilities across Canada, the United States, and Australia. Amid the challenging environment, the company’s management has announced that it would focus on dividend sustainability in the near term rather than acquisitions. This announcement appears to have weighed on investors’ sentiments, leading to a selloff.
Meanwhile, TransAlta Renewables expects to put a few renewable and transmission assets in Australia into service this year. It also hopes to bring back Kent Hills facilities into service in the second half of this year. So, the management believes that its cash flows are resilient. The company hopes to post an adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) of $495-$535 million in 2023, which is slightly higher than its 2022 guidance.
Amid the selloff, TransAlta Renewables’s NTM price-to-earnings ratio has declined to 15.4, while its dividend yield stands at a juicy 7.66%, making it an attractive buy.
NorthWest Healthcare Properties REIT
With a dividend yield of 7.9%, NorthWest Healthcare Properties REIT (TSX:NWH.UN) is my final pick. REITs (real estate investment trusts) have taken a severe beating over the last few months due to rising interest rates. Amid the weakness, the company is trading at a 30% discount from its 52-week high. Amid the steep correction, the company’s price-to-book ratio has declined to one.
Meanwhile, the company had entered a joint venture with an institutional investor in the United Kingdom to expand its footprint in the United Kingdom healthcare real estate space. Its diversified portfolio, long-term lease agreements, high-quality tenants (with government support), and inflation-indexed rents provide financial stability. So, I believe the company’s payouts are safe, thus making the stock attractive, despite the volatility.
