Despite the volatility in the market, top Canadian dividend stocks are an excellent source to earn worry-free passive income. Thankfully, the TSX has several fundamentally strong, dividend-paying stocks that pay and grow their dividends, regardless of the macro and geopolitical headwinds in the market.
However, I’ll focus on three dividend-paying stocks that are trading cheap and look highly attractive near the current levels.
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goeasy
Trading at the next 12-month (NTM) price-to-earnings multiple of 6.5, goeasy (TSX: GSY) stock looks unreasonably cheap near the current levels. Notably, goeasy’s earnings per share sport a CAGR (compound annual growth rate) of 27% in the last five years, and it offers a dividend yield of over 4%, making its stock highly attractive on the valuation front. Meanwhile, it has increased its dividend for nine consecutive years and is included in the S&P/TSX Canadian Dividend Aristocrats Index.
While goeasy stock is trading unreasonably cheap, management projects double-digit growth in its revenues over the next three years. Leverage from higher sales, strong payment and credit volumes, a high-quality asset base, and a focus on driving efficiency will lead to double-digit growth in its earnings and drive its stock price and dividend payouts.
Capital Power
North American power producer Capital Power (TSX: CPX) is another high-quality, dividend-paying company shares of which are unreasonably cheap. The company operates a low-risk utility business supported by long-term contracts. Its diversified renewable asset portfolio generates strong earnings to support its dividend payouts. It has increased its dividend for nine consecutive years and forecasts a 6% annual growth in its dividend through 2025.
Capital Power stock is trading at the NTM enterprise value to sales ratio of 6.5, which is well below its historical average, providing a good buying opportunity. Meanwhile, its low-risk business with a focus on renewable power and the strong pipeline of developmental projects positions it well to deliver strong shareholders’ returns. The stock also offers a solid dividend yield of over 5.3%.
Scotiabank
The regional bank crisis in the U.S. and macro uncertainty have weighed on Canadian bank stocks, making them cheap on valuation. Among the top Canadian banks, shares of Scotiabank (TSX: BNS) are trading cheaper than peers, making it a compelling investment near the current levels.
This financial services giant has been paying a regular dividend since 1833 and has uninterruptedly paid it since then. Impressively, Scotiabank increased its dividend at a CAGR of 6% in the past decade, reflecting the continued expansion of its earnings base and a sustainable payout ratio.
Its diversified revenue base with a focus on high-quality growth markets in the Americas positions it well to deliver solid growth. Its ability to drive loans, a strong balance sheet, and solid credit quality indicate that Scotiabank will likely deliver solid financials in the coming years.
Thanks to the recent pullback, Scotiabank stock is trading at the NTM price-to-earnings multiple of 8.8, which is lower than its peers and the historical average. Furthermore, Scotiabank stock offers an attractive yield of over 6%.
Bottom line
These companies have resilient businesses and a growing earnings base to support their payouts. Despite their solid businesses, shares of these companies are trading unreasonably cheap, making them a compelling investment near the current price levels.
