The latest data from Statistics Canada revealed that Canada’s inflation rate dropped to 2.8% in June. This rate is within Bank of Canada’s target inflation range of 1-3% and indicates that the interest rate hike cycle may be over. This news triggered a positive reaction in the Canadian stock market — which has risen 0.55% intraday — using iShares S&P/TSX 60 Index ETF as a proxy.
Still, the cost of living has increased too much for the general public. For example, the food purchased from grocery stores rose 9.1% year over year in June. Therefore, passive income from dividend stocks has become more valuable. Here are a couple of Canadian dividend stocks I’ll be buying hand over fist this month to boost my income.
CIBC stock
Canadian Imperial Bank of Commerce (TSX: CM) is a big Canadian bank stock that is on sale. CIBC stock is about 28% off from its 2022 peak. The dividend stock is basing. Once it breaks out, it’s only a matter of time before it will recover to the 2022 peak level of about $80 per share. That’s a price gain of about 39% from $57.74 per share at writing. Moreover, at this quotation, the bank stock offers a juicy dividend yield of 6%.
Notably, the bank stock sold off for a reason. Because of an increased probability of a recession by 2024, the bank’s loan loss provision has increased, which has weighed on its earnings. Its payout ratio is estimated to be about 63% of its earnings this year. This is a higher payout ratio than normal, but its dividend remains sustainable.
The bank remains profitable, and it’s a good time to accumulate shares when there’s higher uncertainty in the economy. The bank also has a strong treasure chest of retained earnings, though I don’t see it needing to reach into the chest to protect its dividend.
NorthWest Healthcare Properties REIT
NorthWest Healthcare Properties REIT (TSX:NWH.UN) is a deep-value and interest rate play. Specifically, buyers are expecting that at some time in the future, the healthcare real estate investment (REIT) stock can revert to the mean when interest rates decline.
The fact that the interest rate-hike cycle may be over, and its cheap valuation may be what’s pushing the stock higher by roughly 12% over the last month or so. Its net asset value (NAV) per unit was $13.16 at the end of the first quarter.
At $6.75 per unit at writing, it trades at a deep discount of about 49% from its NAV. Analysts have a more conservative 12-month consensus price target of $9.21 on the stock, which still indicates a decent discount of roughly 27% or near-term upside potential of 36%.
The monthly dividend stock generates substantial cash flow from its diversified portfolio across 233 properties and more than 2,000 tenants. Its portfolio maintains a high occupancy rate of approximately 97% and has a weighted average lease expiry of about 14 years. So, it’s a good income investment with a current yield of just over 11.8%. Even if it had to cut its cash distribution, it could still make a good income and total-return investment over the next three to five years, assuming interest rates decline, such as during a recession.
