The supermarket of stocks, or the TSX, is not for rich people only, and it is open to young and old Canadians with investment appetites, even if they have limited capital, budget constraints, or are cost-conscious. Investors can purchase incredibly cheap stocks to generate passive income.
Today, you can buy shares of Extendicare (TSX:EXE), Cardinal Energy (TSX:CJ), and Dexterra Group (TSX:DXT) at less than $10 per share. The average dividend yield is a super-high 7.72%. Hold them in your Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) for tax-free money growth.
Extendicare has been operating in the Medical Care Facilities industry since 1968. Through its subsidiaries, this $554.84 million company provides care and services for Canadian seniors. The offerings include long-term care (LTC), retirement living, and home health care services. Consulting services and contracts with third parties are also available.
As of this writing, EXE trades at $6.65 per share (+1.99%) and pays a 7.21% dividend. The business is turning the corner and slowly recovering from COVID-19. Its president and chief executive officer (CEO) Dr. Michael Guerriere said, “The pandemic continues to cause volatility in our results, with ongoing mismatches between costs and funding.”
Nonetheless, the average LTC occupancy is improving, while demand for home healthcare services remains high. In the nine months that ended September 30, 2022, revenue rose 6% year over year to $911.18 million. The net earnings soared 365% to $71.25 million versus the same period in 2021.
At only $7.55 per share (-0.16%), Cardinal Energy trades at a slight discount but pays a fantastic 9.74% dividend. You’d also love this energy stock because it pays monthly dividends. The $1.17 billion company operates in Alberta, British Columbia, and Saskatchewan and acquires, explores, and produces crude oil and natural gas.
The business was superb last year due to the favourable pricing environment. After three quarters in 2022, net earnings declined 23% year over year to $188.82 million. However, total revenue (petroleum and natural gas) and cash flow from operating activities climbed 91% and 267% to $582.69 million and $268.67 million, respectively.
Management said that in the third quarter (Q3) of 2022, it paid $24 million in dividends out of the $56.3 million free cash flow (FCF). Before the quarter, the board approved a 20% dividend increase to the common shares.
Dexterra in the industrial sector is absurdly cheap at $5.91 per share but outperforms with its 6.87% year-to-date gain. If you take a position today, you can partake of the 6.21% dividend. The $385.53 million company provides integrated facilities management services, workforce accommodation solutions, modular building capabilities, and other support services to clients in the public and private sectors.
Despite the challenging environment, the business has been steady. In Q3 2022, total revenue increased 28% to $259.8 million versus Q3 2021. However, the net earnings declined 33% year over year to $5.17 million. Notably, FCF reached $23.55 million compared to -$2.75 million a year ago.
Dexterra is far from mediocre, as evidenced by its 120.98% total return in 2.71 years. It translates to a compound annual growth rate (CAGR) of 34.03%.
Understand the risks
Dividend investing is a sure way to generate passive income. However, investors must understand the business risks in every prospect to manage expectations.