The S&P/TSX Composite Index (TSX:^OSPX) has fallen more than 8% since its highs of 2022. And that’s a good thing, in a sense. Because I think we all kind of knew that the market had gotten ahead of itself last year. For long-term passive income investors, this is not a problem. In fact, this fall has given us some dirt cheap TSX stocks to feast on today.
Here are three of these TSX stocks.
Nutrien: An ultra-cheap TSX stock posting strong results
As the world’s largest provider of crop inputs (fertilizer) and services, Nutrien Inc. (TSX:NTR) has secured itself a firm spot and a bright future. Yet, Nutrien stock remains highly undervalued, trading at only five times earnings.
This is a reflection of the volatility in crop pricing that once hit Nutrien hard. I mean, this is a cyclical business so it’s right to be at least a little skeptical. The last few years, however, have been really good to Nutrien. Impressive pricing gains have driven record results, as well as strong dividend growth.
In fact, in the last five years, revenue increased 93%. Also, net income has grown almost 115% and cash flow from operations has increased 295%. All of this has brought dividends 40% higher, making Nutrien a dividend stock of choice for passive income investors.
Suncor stock: A strong track record of passive income generation
Suncor Energy Inc. (TSX:SU) has had a rough time in the last year. Safety issues and operational deficiencies dominated investors’ thoughts as Suncor’s stock price sunk 19%. While investor concerns were real, the fact remains that Suncor is an oil and gas powerhouse, with a well-diversified business and strong and steady cash flows.
All of this makes Suncor stock an ideal candidate for passive income investors. In fact, Suncor has a stellar history of dividend stability, reliability, and growth. For example, Suncor’s dividend increased at a compound annual growth rate of 17% in the last 20 years. This is a phenomenal track record and one that has made many shareholders extremely happy and wealthy.
In 2022, results have continued strong. In fact, Suncor posted record results. This was driven by strong oil prices as well as strong crack spreads. Also, Suncor generated adjusted funds flow of more than $18 billion, 77% higher than in 2021.
Yet, Suncor stock is truly an underdog today. But this was not always so, and Suncor’s stock price used to reflect this. But I don’t think it will remain so for long. Thus, passive income investors might want to consider this dividend stock.
Tourmaline: A leading TSX dividend stock for natural gas exposure and growing passive income
The earnings and cash flow power behind Tourmaline Oil Corp. (TSX:TOU) has been phenomenal in the last couple of years. I mean, natural gas prices have soared in North America, and despite the recent demolition of natural gas prices, the global market remains very robust.
Tourmaline, which is the largest natural gas producer in Canada, is benefitting immensely from natural gas markets. As a result, Tourmaline stock has rallied significantly over the last three years. Tourmaline has also rewarded its shareholders by increasing its dividend payments. In fact, management has committed to pay out any excess cash flow to shareholders, effectively cementing Tourmaline stock as ideal for passive income investors.
Today, Tourmaline stock is cheap despite its impressive five-year track record. This track record includes cash flow growth of 270% and regular dividend growth of 213% (plus numerous special dividends). Yet, Tourmaline stock is trading at a mere 3.4 times cash flow and 4.2 times earnings. The market is clearly reacting to the drop in the price of natural gas, which fell 77% since its 2022 highs.
It’s a big problem for Tourmaline, that’s for sure. However, it’s not one that will persist, in my view. The natural gas market has opened up to global demand forces, and this will likely support prices for some time. You see, Canada is the global leader for the supply of cheap, stable, and comparatively clean natural gas.