Canadian equities are expected to remain volatile in the next 12 months, as individuals and corporates continue to wrestle with macro factors such as inflation, rising interest rates, and a looming threat of a global recession.
A challenging environment has dragged valuations of stocks across multiple sectors lower in the last 15 months. But a pullback in share prices allows you to gain exposure to quality companies with high dividend yields.
Here are three such cheap dividend stocks that currently offer you a yield of up to 11% in April 2023.
Algonquin Power & Utilities stock
Despite a 40% cut in dividends, Algonquin Power & Utilities (TSX: AQN) currently offers investors a forward yield of more than 5%. A key reason for the dividend cut was the impact of rising interest rates and the company’s high debt levels.
In the last three years, AQN’s long-term debt increased by 80%, resulting in higher interest payouts. Its debt-to-equity ratio has risen to 1.44 in 2023 compared to 0.85 at the start of 2021. The company’s times-interest-earned ratio is above one, indicating it can cover still cover the cost of debt. This ratio measures the interest-paying ability of corporates.
However, AQN stock is up 23% year to date, as it has a diversified base of cash-generating assets. Valued at a market cap of almost $8 billion, AQN operates in the utility and renewable energy sectors. Its revenue rose by 22% year over year to US$2.76 billion in 2022, while adjusted earnings soared by 6% to US$475 million. Moreover, AQN’s operating cash flows almost quadrupled to US$619 million in 2022.
Slate Grocery REIT stock
Valued at a market cap of $800 million, Slate Grocery REIT (TSX: SGR.UN) offers you a dividend yield of 8.8%. The real estate investment trust provides investors exposure to a resistant-resistant vertical as 96% of its properties are grocery anchored.
Slate Grocery owns and operates 117 properties in 24 states in the U.S. With a total asset value of $2.4 billion spanning 15.3 million square feet, some of its largest tenants include giants such as Walmart, Amazon, and Costco. Moreover, 96% of its tenant are on net leases, providing protection against rising operating expenses.
As inflation heats up, consumers will also continue to spend more on groceries and other essential products while cutting back on discretionary spending.
In addition to its tasty dividend yield, Slate Grocery REIT stock is also trading at a discount of 20% to consensus price target estimates.
Fiera Capital stock
The final dividend stock on my list is Fiera Capital (TSX: FSZ), which yields 11.2%. An alternative asset management company, Fiera Capital’s performance is linked to the state of the economy.
In a bull run, asset managers including Fiera Capital attract investments, allowing them to increase assets under management. This, in turn, results in higher management and performance fees for the company. However, when market sentiment is bearish, investors consider low-risk asset classes such as bonds or gold, resulting in huge capital outflows.
Priced at 6.6 times forward earnings, FSZ stock is also trading at a discount of 21% to consensus price target estimates.
