The easing of the banking crisis and softening of inflation have improved investors’ sentiments, with the Canadian equity markets making a strong recovery over the last few days. However, the recent announcement by OPEC+ (Organization of the Petroleum Exporting Countries) to cut its oil production by 1.2 million barrels per day from May has increased oil prices, thusly driving inflation in the coming months.
So, given the uncertain outlook, investing in high-yielding dividend stocks would be prudent. The following three dividend stocks, which trade at an over 20% discount from their 52-week high, could boost your passive income.
Algonquin Power & Utilities
Supported by improving financials and its deleveraging initiatives, Algonquin Power & Utilities (TSX: AQN) is trading over 30% higher for the year. Despite the surge, it trades at around a 40% discount compared to its 52-week high. Besides, its valuation looks attractive, with its NTM (next 12 months) price-to-sales multiple trading at 2.
Meanwhile, AQN is working on strengthening its balance sheet. It plans to sell around US$1 billion of assets, which could help lower its debt levels. Additionally, it has slashed its dividends and reduced its capital intensity, strengthening its financial position in this higher interest rate environment. Further, the company has committed to invest around US$3.6 billion this year, with a substantial percentage of it in low-risk utility assets. So, considering all these factors, I believe the company’s future payouts are safe.
After the recent cuts, AQN pays a quarterly dividend of US$0.1085/share, with the yield for the next 12 months at 5.1%.
TC Energy
TC Energy (TSX: TRP), which has lost around 26% of its stock value compared to its 52-week high, would be my second pick. A substantial spillage at its Keystone Pipeline project appears to have made investors nervous, dragging its stock price down.
Defensively, the company operates a regulated midstream energy business, with 95% of its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) underpinned by long-term agreements. Supported by these robust cash flows, TRP stock has raised dividends at a CAGR (compounded annual growth rate) of over 7% for the last 23 years. Its yield currently stands at a juicy 6.82%.
Meanwhile, TC Energy could benefit from the growing export of LNG (liquefied natural gas) from North America, as it could increase asset utilization. Further, the company plans to put around $6 billion of projects into service this year, boosting its financials. So, I believe TC Energy’s future payouts are safe.
Bank of Nova Scotia
My final pick would be the Bank of Nova Scotia (TSX: BNS), which has lost around 23% of its stock value compared to its 52-week high. The collapse of Silicon Valley Bank and Scotiabank’s exposure to emerging markets while facing challenging macro factors has dragged the company’s stock price down. Amid the steep correction, BNS stock’s NTM price-to-earnings multiple has declined to an attractive 8.7.
Although the Scotiabank could witness volatility in the near term, I believe it would be an excellent buy for long-term investors, given its impressive record of dividend hikes, high yield, and attractive valuation. The bank has raised its dividends 43 times over the last 45 years. Meanwhile, it currently pays a quarterly dividend of $1.03/share, with its yield at 6.1%. Also, the company could benefit from its presence in high-growth markets in the long term.
