With China posting weak July economic numbers and growing concerns over the health of the banking sector in the United States, the equity markets have turned volatile this month. Amid the broader weakness, the S&P/TSX Composite Index is down around 4% this month. Given the volatile environment, investors can look to earn a stable passive income by investing in the following four cheap dividend stocks.
TC Energy
TC Energy (TSX: TRP) is an energy infrastructure company that operates a pipeline network transporting oil and natural gas across North America. It is also involved in the power production and storage business. The rising interest rates and oil spillage at its Keystone pipeline facility appear to have weighed on the company’s stock price, with the company losing around 28% of its stock value compared to its 52-week highs. Amid the selloff, the company trades 12.1 times analysts’ projected earnings for the next four quarters while its forward dividend yield stands at a juicy 7.71%.
Meanwhile, having placed around $2.1 billion worth of projects into service in the first two quarters, the midstream energy company is on track to put around $6 billion of assets into service this year. It has announced to sell a 40% stake in Columbia Gas Transmission and Columbia Gulf Transmission for $5.2 billion, thus strengthening its balance sheet. Further, the company is working on spinning off its liquids pipeline segment to focus on its power generation and natural gas transmission business. Considering all these factors, TC Energy would be ideal to boost your passive income.
Algonquin Power & Utilities
Algonquin Power & Utilities (TSX: AQN) is another cheap dividend stock to have in your portfolio. The company has lost around 50% of its stock value compared to its 52-week high amid weak quarterly performances and increased debt levels. Meanwhile, the energy infrastructure company has taken several deleveraging initiatives, including non-core asset sales, lower capital intensity, and slashing its quarterly dividend.
The company’s management is working on selling its renewables business to focus more on its stable regulated utility businesses. With the implementation of new rates at certain facilities, I expect the company’s financials to improve in the coming quarters. Also, it offers an excellent forward dividend yield of 6.02% and trades at an attractive NTM (next 12-month) price-to-earnings multiple of 11.8, making it an attractive buy.
Northland Power
Amid the challenging period for renewable energy companies, Northland Power (TSX: NPI) has lost around 18.5% of its stock price compared to its recent highs. The rising interest rates are weighing on capital-intensive businesses, thus dragging their financials down.
However, the green energy company could benefit from the growing transition towards clean energy. Meanwhile, McKinsey has projected the power produced from solar and on- and off-shore wind projects could triple by 2030 compared to 2021 levels, thus expanding the addressable market for the company.
Northland Power has 20 gigawatts of projects in the pipeline across the solar, off-shore, and on-shore sectors. Its long-term PPAs (power-purchase agreements) offer stability to its financials, thus delivering stable and reliable cash flows. So, I believe the company’s future payouts are safer. With the company currently paying a monthly dividend of $0.10/share, its forward yield stands at 5.14%. Considering all these factors, I am bullish on Northland Power.
Pizza Pizza Royalty
My final pick is Pizza Pizza Royalty (TSX: PZA), which offers an excellent forward dividend yield of 5.93% and trades 1.7 times its book value. Given its menu innovations, brand promotions, and value offerings, the company continues to enjoy solid same-store sales growth. In the first six months, its same-store sales grew by 11.4%.
Supported by same-store sales growth and the net addition of 16 restaurants, the company’s royalty income grew by 13%. Amid the top-line growth, the company’s adjusted earnings per share increased by 13.6%. Meanwhile, I expect the uptrend in the company’s financials to continue, given its plans to expand its restaurant count by 3-4% and restaurant renovation plans. Also, given its highly franchised business model, the company’s financials are immune to inflation. So, Pizza Pizza Royalty could be an excellent buy for income-seeking investors.
