3 Canadian Stocks That Offer Good Value

These Canadian stocks offer good value that could lead to strong total returns over the next five years, but the stocks could get cheaper.

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When it comes to stock investing, investors can make money by earning dividends or booking price gains. Here are a few Canadian stocks that seem to offer good value and pay dividends, too.

Magna International

Magna International (TSX:MG) is a global auto parts maker that tends to fall meaningfully when there’s a recession. For example, in the last two recessions, the cyclical stock fell more than 40% from peak to trough. Brave investors who scooped up shares at the bottom more than doubled their money both times within two years. Even if you didn’t catch the bottom, as long as you had patience to hold for a comeback, strong price appreciation would still have been achieved.

Today, world economic growth is dampened by higher interest rates. So, the stock has been depressed. At $69.85 per share at writing, Magna International stock, which has an A- S&P credit rating, offers a discount of about 23% according to the 12-month analyst consensus price target. At this quotation, it also offers a dividend yield of 3.6%. Its trailing-12-month (TTM) payout ratio was 55% of earnings.

Jamieson Wellness

The stock valuation of Jamieson Wellness (TSX:JWEL) has really come down to Earth by falling by a third year to date. The depression of the stock probably has to do with lowered guidance. Its latest 2023 outlook from its second-quarter (Q2) earnings report predicts adjusted EBITDA, a cash flow proxy, growth of 13% to 16% and adjusted earnings per share growth of up to 5.2%. As well, Jamieson has been experiencing margin compression. China has been a growth driver for the business, but the region only made up about 6% of its total revenue in Q2.

Accordingly, the manufacturer, distributor, and marketer of branded natural health products, including vitamins, minerals, and supplements now trades at about 14.8 times adjusted earnings at $23.42 per share. This is the cheapest multiple in its trading history.

Jamieson just raised its dividend by 11.8% in August. At the recent price, the stock offers a dividend yield of just over 3.2%. Its TTM payout ratio was 59% of earnings. And analysts believe it trades at a whopping discount of almost 41%. With few consumer staples stocks to choose from on the TSX, Jamieson seems to offer rare value.

Bank of Montreal

The big Canadian bank stocks, which have been consistent dividend payers, are offering greater value to investors. For example, Bank of Montreal (TSX:BMO) stock has declined approximately 13% over the last 12 months.

At $106.27 per share at writing, it trades at about 8.9 times adjusted earnings. Surely, it’s being depressed by a more uncertain economic environment currently. It trades at a discount of close to 20% from its long-term normal valuation. However, over the course of the economic cycle, like its big Canadian bank peers, it tends to deliver stable earnings growth that lead to solid long-term returns.

At the recent price, the dividend stock offers a fabulous dividend yield of 5.5%. For your reference, its 10-year dividend growth rate is 6.8%.

Food for thought

These Canadian stocks appear to be cheap and are trading at good valuations. However, it doesn’t mean they can’t get cheaper, especially under negative investor sentiment. It should provide some reassurance that they tend to grow their dividends over time so investors, at least, get to enjoy growing income while bearing the market volatility.

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 Kay Ng has positions in Bank of Montreal. The Motley Fool recommends Magna International. The Motley Fool has a disclosure policy.

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