There are plenty of dividend stocks on the Canadian stock market. But which should you choose? The blue chip stocks offer low yields while the high-yield stocks are too risky for most investors. With that in mind, here are some of the most undervalued Canadian stocks with the best dividend yields.
SmartCentres REIT (TSX:SRU.UN) has been caught up in the global real estate crash. Residential real estate was severely overvalued while commercial properties took a blow during the pandemic. Now, rising rates are making the real estate investment game much more difficult. That’s why real estate investment trusts (REITs) are in a bear market.
Over the past two months, SmartCentres has also lost 9% of its value. Now, the stock trades at $26 – just 9 times earnings per share. Meanwhile, the dividend yield is 7.1%. The company’s diversified portfolio puts it in a better position than the rest of the industry.
Alaris Equity Partners Income Trust (TSX:AD) is another undervalued dividend opportunity. The company offers growth capital to mid-sized private companies. In exchange, it receives preferred equity stakes that provide high dividend yields and consistent cash flows.
Much of this recurring cash flow is paid out to shareholders. Traditionally, the company offered a monthly dividend payment but the team recently decided to move to a quarterly schedule. Investors can now expect over $1.33 in annual dividend payments – which implies a dividend yield of 8.2%.
Alaris stock trades at just 6.3 times earnings. That implies an earnings yield of nearly 16%.
The stock is down 17% over the past year as investors worry about a recession. However, if Alaris manages risk appropriately, it should see consistent dividend income and perhaps some better investment opportunities in this environment.
Power Corporation of Canada (TSX:POW) is another underrated dividend stock that should be on your radar. The financial conglomerate offers services across North America, Europe, and Asia. It also owns meaningful stakes in emerging financial technology startups like Wealthsimple.
The conglomerate’s portfolio includes well-known and well-established financial brands like Lifeco and IGM Financial. This provides it a robust base of consistent earnings.
Power Corp stock is up 7% year to date. Despite this, POW stock is still trading at 11 times earnings because the price is 22% lower than last year. It also offers a sizable 5.7% dividend yield.
As the Bank of Canada pauses its rate hiking cycle and bond yields plummet, Power Corp. could be in a strong position for a rebound. Keep a close eye on this dividend income opportunity.
Canada’s most underrated stocks offer the perfect mix of high dividend yield and low valuation. Add them to your watch list right away.