2 Dirt-Cheap Stocks to Build the Core of Your TFSA

Sun Life Financial (TSX:SLF) and another dirt-cheap TSX stock to buy this September as the TSX Index fades a bit.

| More on:
Financial technology concept.

Image source: Getty Images

The broader TSX Index took a big slip on Tuesday’s session as the inflation number came in a tad hotter than expected. Undoubtedly, just when you thought the inflation dragon was slain and that interest rates could go no higher, Canada got hit with 4% in inflation for the last month.

Indeed, August’s 4% rate was considerably higher than the 3.3% posted in July. Further, consumers at the grocery aisle are likely feeling even more pain as the nation’s top grocers are pressured to do something about the absurd price hikes.

Let’s have a look at two intriguing value plays that TFSA (Tax-Free Savings Account) investors may wish to consider as the September stumble continues.

Loblaw

Indeed, Loblaw (TSX:L) has felt a bit of the heat amid scorching-hot levels of food price inflation. The grocer, which is known to have many low-cost food items (think the private label brands like No Name), has also been making rounds on social media for outlandishly priced goods caught on camera by certain consumers. It’s not good press for Loblaw. However, I do think Loblaw is poised to keep on benefiting from this turbulent economic environment.

As inflation lingers, I suspect more people will shop at the likes of a Loblaw (think No Frills or Superstore) versus a pricier organic grocery retailer. Even if Loblaw is strong-armed to lower its prices, I simply do not see a scenario where the stock sags in the face of a potential recession that could prove worse than the market is currently expecting.

Yes, we all want a soft landing, but nobody knows if we’ll get one, as the Bank of Canada (BoC) looks to add a few more rate hikes into the mix over the coming months. For now, the BoC is leaving the door open, and they’re right to do so, even as folks with outstanding debt balances feel even more of the pinch.

Either way, Loblaw stock trades at just 18.4 times trailing price-to-earnings alongside a nice 1.54% dividend yield. That’s a good value given where we’re at in the business cycle (likely late stages).

Sun Life Financial

Up next, we have Sun Life Financial (TSX:SLF), a Canadian life insurer that’s been feeling the wind to its back since late August. Though shares haven’t gone far since the pre-pandemic peak of around $66 per share, I do think the firm looks well-equipped to survive this stormy September season. The company’s latest quarter saw decent results coming from its Asian division. Should the Asian economy continue recovering, things could get a whole lot brighter for Sun Life.

The group health and protection segment has also been a strong point for the firm of late. Despite the promising results, TFSA investors should stay patient with the firm, as it attempts to navigate through what could be a harsh economic climate in Canada.

At writing, the stock trades at 13.6 times trailing price-to-earnings, with a 4.41% dividend yield. Given its robust quarter and modest multiple, I view shares as a great way to play a post-recession recovery.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joey Frenette has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Dice engraved with the words buy and sell
Dividend Stocks

EQB Inc Stock: Buy, Sell, or Hold

EQB Inc (TSX:EQB) is Canada's fastest-growing bank.

Read more »

pipe metal texture inside
Dividend Stocks

Enbridge Stock: Buy, Sell, or Hold Today?

Enbridge is up 7% in the past six months. Are more gains on the way?

Read more »

money cash dividends
Dividend Stocks

The 2 Stocks Every Dividend Investor Should Own for Reliable Cash

Dividend stocks offering consistent and reliable returns can be a crucial asset in any portfolio, especially for income-producing dividend portfolios.

Read more »

grow dividends
Dividend Stocks

2 Dividend Stocks to Double Up on Right Now

These top TSX dividend-growth stocks now offer yields above 7%.

Read more »

Dollar symbol and Canadian flag on keyboard
Dividend Stocks

TFSA: 2 Canadian Stocks to Buy and Hold for Tax-Free Gains

Building a large, tax-free nest egg in your TFSA with growth stocks can give you more control over your tax…

Read more »

Women's fashion boutique Aritzia is a top stock to buy in September 2022.
Dividend Stocks

May Boycotts: Is Loblaw Stock in Trouble?

Even extreme fluctuations in consumer purchasing patterns may not impact a stock as aggressively as demoralizing actions like boycotts.

Read more »

A close up image of Canadian $20 Dollar bills
Dividend Stocks

Want $2,000 in Annual Dividends? Invest $27,000 in These 3 Stocks

These three top dividend stocks could help earn a stable passive income.

Read more »

edit Sale sign, value, discount
Dividend Stocks

3 Absurdly Cheap Stocks to Buy and Hold for Years

Looking for some great stocks to buy for long-term growth? Here are three absurdly cheap stocks that are impossible to…

Read more »