Last week, the Commerce Department of the United States reported that the GDP (gross domestic product) rose by 4.9% in the third quarter, higher than analysts’ expectation of 4.7%. It was also an increase from 2.1% in the second quarter. Despite the solid GDP numbers, the global equity markets have continued to be under pressure, with the S&P/TSX Composite Index falling around 2% last week. The fear that the Federal Reserve of the United States could continue to maintain its monetary tightening initiatives amid the sticky inflation has led to a correction in stock prices.
Amid the growing volatility, investors can buy cheap dividend stocks to earn a stable passive income. The following three dividend stocks offer yields above 7%.
Enbridge
Enbridge (TSX: ENB) is one of the top stocks for income-seeking investors, given its high yield and consistent dividend growth. The company operates a low-risk midstream energy business, with around 51% of its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) generated from take-or-pay contracts and 47% from regulated assets. So, the energy infrastructure company generates stable and predictable cash flows, allowing it to increase its dividends consistently. Meanwhile, the company has raised its dividends at an annualized rate of over 10% for the previous 28 years, with the forward yield at 8.15%.
Further, Enbridge is strengthening its natural gas utility asset base by acquiring three natural gas utility companies in the United States from Dominion Energy for $19 billion. Besides, it is progressing with its $19 billion secured capital program, which could boost its financials in the coming quarters. However, the company has been under pressure amid rising interest rates and the fear that its proposed acquisitions could increase its debt. It has lost around 13% of its stock value this year and trades at a juicy NTM (next 12 months) price-to-earnings multiple of 15.7, making it an attractive buy.
BCE
BCE (TSX: BCE) is another dividend stock you could add to your portfolio, given its stable cash flows, healthy growth prospects, and high yield. Telecom companies earn a substantial percentage of their revenue from recurring sources. So, the cash flows of these companies are stable and predictable, thus allowing them to pay dividends at a healthier rate. Besides, the sector is highly capital-sensitive, thus creating a natural barrier for new entrants while allowing the existing players to enjoy higher margins.
Supported by these solid cash flows, BCE has raised its dividends at an annualized rate of over 5% for the previous 15 years. Its forward yield stands at 7.61%. Besides, the demand for telecommunication services is growing in this digitally connected world. In this growing addressable market, the company is expanding its 5G and broadband infrastructure to grow its customer base and drive its financials. Amid the weakness in the broader equity markets, the telco has lost around 10% of its stock value this year while trading at an attractive NTM price-to-sales multiple of 1.9. Considering all these factors, I believe BCE would be an attractive buy to boost your passive income.
NorthWest Healthcare Properties REIT
My final pick would be NorthWest Healthcare Properties (TSX:NWH.UN), which owns and operates highly defensive healthcare properties across seven countries. The company has lost around 54% of its stock value this year due to concerns over rising debt levels and weak quarterly performance. Amid the sell-off, the company trades at 0.4 times its book value.
Meanwhile, NorthWest Healthcare is strengthening its financial position through financing and disposition initiatives. It has sold a part of its stake in AUFML (Australian Unity Funds Management Limited) for $82 million, which the company plans to utilize to lower its debt. Additionally, it is working on selling the remaining stake, which could generate $110–$120 million. Further, the healthcare REIT has identified several non-core assets with the intention of disposition. Year to date, it has generated $74 million through asset sales and is working to dispose of additional assets that can produce over $50 million this quarter.
Meanwhile, NorthWest Healthcare has slashed its monthly dividends from $0.06667/share to $0.03/share. Despite the dividend cuts, its yield is at a juicy 8.99%, making it an attractive buy.
