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

dividends grow over time
Dividend Stocks

1 Magnificent Dividend Stock That’s Down 10% and Trading at a Once-in-a-Decade Valuation

This dividend stock may be down around 10%, but there is a huge future opportunity for those wanting growth as…

Read more »

Canada national flag waving in wind on clear day
Dividend Stocks

RRSP Must-Haves: 2 Canadian Stocks to Secure Your Future

The TSX’s dividend pioneer and first Dividend King are must-haves in an RRSP to ensure financial security in retirement.

Read more »

stock research, analyze data
Dividend Stocks

How Much to Invest to Get $500 in Dividends Every Month

TSX dividend stocks such as Enbridge, TD Bank, and Telus, can help you earn $500 in monthly dividend payments.

Read more »

Golden crown on a red velvet background
Dividend Stocks

Dividend Powerhouses: Canadian Stocks to Fuel Your Portfolio

These two top Canadian dividend aristocrats are some of the top stocks on the TSX to buy now and hold…

Read more »

Dial moving from 4G to 5G
Dividend Stocks

This Undervalued Dividend Stock is Worth Buying Right Now

Want an undervalued dividend stock with long-term potential and a juicy yield? Here's an option you may regret not buying…

Read more »

A worker gives a business presentation.
Dividend Stocks

1 Stock I’m Buying Hand Over Fist in July Despite the Market’s Pessimism

This top dividend stock is going through a rough patch, but don't let that count out all the growth we've…

Read more »

person on phone leaning against outside wall with scenic view at airbnb rental property
Dividend Stocks

2 TSX Stocks Poised to Have a Big Summer

Restaurant Brands International (TSX:QSR) stock and another darling that could be too cheap to ignore this summer.

Read more »

Dividend Stocks

Forget Fortis Stock: Buy This Magnificent Utilities Stock Instead

Looking for high dividends and returns? Then I'm sorry, but Fortis (TSX:FTS) stock probably isn't for you.

Read more »