Investing in cheap or undervalued dividend stocks has several benefits. Here, you can enjoy high dividend yields, as value stocks trade at lower multiples. Moreover, investors can also benefit from capital gains when investor sentiment improves.
So, income-seeking value investors can consider investing in these three cheap TSX dividend stocks right now.
Diversified Royalty stock
A small-cap company, Diversified Royalty (TSX: DIV) acquires top-line royalties from franchisors and multi-location businesses in North America. The business model allows it to grow royalty streams over time and pay shareholders a monthly dividend.
Right now, the TSX stock offers investors a dividend of $0.02 per month, translating to a forward yield of 8%.
Diversified Royalty has seven royalty partners that include AIR MILES, Mr. Lube, and Stratus Building Solutions. Each of these partners are in different industries and have been in business for 16 to 60 years.
DIV expects to increase cash flow per share by focusing on accretive royalty purchases and the growth of its franchises.
In the first quarter (Q1) of 2023, the company’s adjusted revenue rose 24% to $13.6 million, while distributable cash stood at $8.8 million, indicating a payout ratio of 96%.
DIV stock is priced at 16.6 times forward earnings as of writing and trades at a discount of 32% to consensus price target estimates.
Slate Grocery REIT
A pure-play, grocery-anchored REIT (real estate investment trust), Slate Grocery (TSX: SGR.UN) has more than $2 billion in assets. It owns and operates 117 properties that span 15.3 million square feet across 24 states in the U.S.
The necessity-based REIT Slate Grocery offers you exposure to a defensive asset class with resilient income streams. Historically, companies part of the grocery vertical have a proven ability to outperform in periods of economic volatility.
Additionally, Slate Grocery emphasized all purchase methods that include e-commerce are facilitated by brick-and-mortar stores for the delivery of goods to the end consumer. Its grocery stores are located near end consumers, which optimizes transportation costs and fulfillment timing.
Investing in Slate Grocery REIT will allow you to benefit from strong tenant demand, low vacancy rates, and continued rent growth.
Slate Grocery pays investors a monthly dividend of $0.072 per share as of writing, indicating a yield of 9.1%. The stock is also priced at a discount of 17% to consensus price target estimates.
Northwest Healthcare REIT
The final TSX dividend stock on my list is Northwest Healthcare REIT (TSX:NWH.UN), which offers unitholders a yield of more than 10%. With 233 properties in eight countries, Northwest Healthcare enjoys an occupancy rate of 97%.
It owns, manages, and develops properties for verticals such as healthcare, education, life sciences, and research.
Similar to Slate Grocery, Northwest Healthcare also operates in a defensive sector with necessity-based tenancies. Several of its medical office tenants enjoy direct or indirect government funding and have long-term leases, allowing Northwest to generate stable cash flows.
Due to the expansion of its properties, Northwest reported revenue of $135 million in the first quarter of 2023, up from $104 million in the year-ago period. Its net operating income rose from $77 million to $95 million in this period.
Given analyst price target estimates, Northwest Healthcare stock is priced at a discount of 35.5% as of writing.
