Investing for Passive Income? Pick Up This Little-Known Dividend Stock

When it comes to dividend stocks, some little-known options can be just as powerful additions to your portfolio as well-known options trading at a discount.

| More on:
A close up image of Canadian $20 Dollar bills

Image source: Getty Images

When it comes to buying dividend stock for a reliable and long-term passive income, it’s best to stick to tried-and-tested companies. Dividend Aristocrats are the best, as they offer high dividend sustainability potential, thanks to their history. There are also dividend companies that have maintained their payouts for years, so even if they are not counted among Aristocrats, they score enough reliability points.

However, you may find some hidden gems if you look outside that “tried-and-tested” pool of dividend payers. This may include stocks that have been condemned by investors for slashing their payouts or little-known stocks that have just started rewarding their investors with dividends. One example of the latter is Alphamin Resources (TSXV:AFM), a $1 billion market cap mining stock at $0.8 per share.

The company

Alphamin Resources claims to have tapped into the most potent tin reserves — i.e., the highest-grade tin mine in the world: Mpama North. The average grade for this tin mine is 4.5%, which is about four times higher than the average. Mining high-grade tin requires less energy and effort than its peers, automatically reducing the cost of operations for the same amount of tin produced.

The bulk of the tin mined in the world is used for soldering. The presence of tin makes the melting point lower, making it ideal for soldering applications where higher temperatures may cause damage to the items being soldered. As a crucial part of virtually every electronic circuit, tin has an ever-present demand. In the last 25 years, tin’s value has risen by about 400%.

The stock and dividends

After years of steady decline, Alphamin Resources started growing after the pandemic and rose by about a thousand percent in less than two years. Even now, it’s trading at a 196% premium to its pre-pandemic peak.

Even though its financials have taken a turn for the worse in the last two quarters, the company is currently modestly undervalued. This may fuel a bullish trend in the future or at least help the stock maintain a healthy level.

The company has only recently started paying dividends from 2022. It paid biannual dividends, first in February and then in August. It has already paid dividends for the first half of 2023, and it’s reasonable to assume that it may continue with the pattern. The payout ratio is quite decent, and at weak financials, it’s a strong sign for dividend sustainability, as it may become even healthier once revenues and income go up.

The most attractive part of the dividends this company is paying is the yield. At 7.5%, its yield is on par with the most generous Dividend Aristocrats currently trading on the TSX.

Foolish takeaway

Small-cap stocks are not preferred for dividend-based passive income, and Alphamin is not just small but new as well. It’s still flying under the radar of most dividend investors, but as more investors flock to it, the stock may gain more momentum. As early birds, you may get to lock in a good yield and enjoy any dividend growth the stock offers in the future.  

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Construction work on a site
Dividend Stocks

Canadian Infrastructure Stocks: Building the Future and Your Wealth

These two Canadian infrastructure stocks are highly defensive and offer excellent long-term potential, making them ideal for this uncertain market.

Read more »

Dividend Stocks

Dividend Investors: Top Canadian Utility Stocks for June 2023

These three top utility stocks could be excellent buys for income-seeking investors.

Read more »

A tractor harvests lentils.
Dividend Stocks

Why Nutrien Stock Is Still a Great Buy on the TSX Today

Nutrien (TSX:NTR) stock has gone through major ups and downs thanks to outside influences, but its bottom line remains incredibly…

Read more »

Businessperson's Hand Putting Coin In Piggybank
Dividend Stocks

Build Your Retirement Fortune With These Top TFSA Stocks

Here are two top Canadian dividend stocks you can add to your TFSA to build wealth for retirement.

Read more »

Path to retirement
Dividend Stocks

Invest in These Stocks for a Worry-free Retirement Income Stream

Are you looking for an income stream that can pay you throughout your retirement? Then invest a portion of your…

Read more »

Dividend Stocks

Is BCE Stock Still a Top Telecom Investment in Canada?

Canada’s telecoms can provide growth and income in a defensive shell. Let’s see if BCE is still a top telecom…

Read more »

Dollar symbol and Canadian flag on keyboard
Dividend Stocks

2 Canadian Dividend Stocks I’ll Be Buying Hand Over Fist in June 2023

These two beaten-down Canadian dividend stocks could help you earn handsome returns on your investment in the long term if…

Read more »

edit Close-up Of A Piggybank With Eyeglasses And Calculator On Desk
Dividend Stocks

If You’d Invested $10,000 in Loblaw Stock in 2012, Here’s How Much You’d Have Today

Loblaw stock had a crazy decade, with many huge moves. This could have created wealth from a $10,000 investment, but…

Read more »