A company’s share price and dividend yield have an inverse relationship. So, if share prices move lower, a company’s dividend yield will rise. When market sentiment is bearish, you can buy several stocks with attractive yields at a discount.
Here are three such cheap dividend stocks down over 20%, you can consider buying in April 2023.
Bank of Nova Scotia stock
One of the largest companies in Canada, Bank of Nova Scotia (TSX:BNS) is valued at a market cap of $80 billion. The failures of banks south of the border coupled with a challenging lending environment, have dragged shares of BNS and its peers lower.
BNS stock is down almost 25% from all-time highs, increasing its dividend yield to a tasty 6%. These payouts have increased at an annual rate of 8.5% in the last two decades, showcasing the resiliency of its balance sheet.
Due to rising interest rates, analysts forecast the earnings for BNS to narrow by 10% to $7.63 per share in 2023. So, BNS stock is priced at nine times forward earnings, which is quite reasonable.
Bank of Nova Scotia is now looking to gain traction in Latin American markets, which may be a key revenue driver for the company.
Analysts tracking BNS stock expect shares to gain around 10% in the next 12 months.
Another financial lender, goeasy (TSX:GSY) stock is down 55% from all-time highs. Despite the pullback, goeasy has returned 3,640% to shareholders in dividend-adjusted gains since April 2023, easily crushing the broader indices.
goeasy is one of Canada’s largest non-prime consumer lenders and has originated over $10 billion in loans to date. In the last five years, it has increased revenue by 20% and adjusted earnings by 27% annually, which have contributed to its outsized gains.
Priced at one times sales and 14 times forward earnings, the TSX Canadian stock offers shareholders a dividend yield of 4%.
While it’s a cyclical stock, GSY has increased earnings by 16.5% annually, which is quite exceptional. The TSX stock is also trading at a discount of 70%, given consensus price target estimates.
Brookfield Infrastructure stock
The final stock on my list is Brookfield Infrastructure (TSX:BIP.UN), which currently yields 4.3%. It grew funds from operations or FFO by 12% to US$2.71 per share and expects the bottom line to expand by another 10% in 2023.
So, Brookfield Infrastructure is priced at 14 times forward earnings, which is cheap for a dividend-paying growth stock.
BIP is a diversified infrastructure company expected to grow its earnings between 6% and 9% annually over the long term, which should support further dividend increases. Its cash flows are backed by inflation-linked contracts allowing BIP to thrive, even when price levels are elevated.
BIP should continue to focus on capital recycling, where it sells mature assets and redeploys the proceeds in investments with potentially higher returns.
Down 20% from all-time highs, BIP stock has already returned 1,320% to shareholders since its initial public offering in 2008. The TSX stock is currently trading at a discount of 40% to consensus price target estimates.