The U.S. markets may be off to a magnificent start, but the TSX Index has barely budged, just up 1.5% year to date versus the S&P 500’s 14.5%. Undoubtedly, U.S. stocks, led by tech, could help the S&P 500 continue the winning streak in the second half of the year.
However, I’d argue that TSX value stocks look best poised to catch up to their high-flying growth counterparts. Further, if the stock market’s run does end in a correction, its value could hold up, and even edge higher.
In this piece, we’ll look at three cheap TSX stocks with sizeable yields that I don’t think will flinch if the S&P 500’s second half sees it forego some of the first-half gains.
Nutrien
Nutrien (TSX: NTR) is a fertilizer company that formed from the merging of Agrium with Potash Corp. of Saskatchewan. The company is a force in the agricultural commodity scene, with a terrific retail business that can help weather any less-than-ideal economic climates.
Back in 2021 and 2022, Nutrien stock was a major winner. Earlier last year, Nutrien spiked, as commodity prices surged while stocks (mostly growth) sagged in what were the early innings of the 2022 bear market. Many commodities really shined last year, but the tables have since turned, and NTR stock has been losing ground fast.
The stock is down 45% from its 2022 peak and more than 20% year to date. Indeed, potash prices have fallen, and the latest quarter was far from perfect. Still, I view Nutrien as a great portfolio diversifier with a pretty solid dividend (3.62% yield). Further, agricultural commodities won’t be on the descent forever, especially as world population growth paves the way for higher crop yields.
With a single-digit price-to-earnings ratio, Nutrien is a great value buy on the dip. Just do be warned that earnings are expected to take a hit, as the company moves on from one of its best few years in recent memory. The good times may be over, but there’s still plenty of value and cash flow to be had by income investors.
SmartCentres REIT
SmartCentres REIT (TSX: SRU.UN) is a retail-focused real estate investment trust (REIT) that’s really been hurting, falling over 28% since its 2022 peak. Indeed, the distribution yield has swollen considerably amid the plunge.
With a 7.93% yield, SRU.UN shares are incredibly bountiful, even as income investors turn against retail real estate. With strong tenants and a residential expansion plan, I don’t think Smart will be down for too long. Further, the payout doesn’t look to be under any extreme level of stress as to call for an imminent reduction.
For now, I view Smart as a great value to capitalize on as commercial real estate fears spread to retail REITs.
Pizza Pizza Royalty Corp.
If you love royalties, Pizza Pizza Royalty (TSX: PZA) is a terrific option to consider. Shares of the name have been in rally mode since bottoming out back in 2020.
With a 6.08% yield, PZA is a bountiful way to gain ground on high levels of inflation. Further, a recession and high inflation could continue to steer consumers away from pricier pizza brands to Pizza Pizza, which offers a great value for money on its offerings.
I’m a big fan of Pizza Pizza for those with a hunger for handsome royalties.
The bottom line for income investors
Income investors may find it profitable to buy the following affordable high yielders going into the second half of 2023. I’m the biggest fan of SmartCentres REIT right here. The pessimism is getting quite absurd.
