2 Dirt-Cheap Dividend Rockstar Stocks for Passive Income

TC Energy (TSX:TRP) and another dividend heavyweight that looks like a bargain-basement buy right here.

| More on:
stock analysis

Image source: Getty Images

We’ve all been forced to get used to volatility over the past few years. From the 2020 stock market crash to the 2021 boom in tech stocks and the many years of inflation that followed, it has been quite an unorthodox start to the 2020s. As inflation winds down in the U.S. and Canada, central banks may be able to take their foot off the rate-hike pedal.

Heck, a few rate cuts may be in the cards as soon as next year. After the bullish start to November, it certainly seems like we’re in for more of a soft landing. The rally in Canadian bank stocks has been a huge sigh of relief. Despite the past few weeks of relief, investors should continue to play the long game and nibble at the value stocks that come across their radar.

There’s no shortage of market bargains out there, even as the market rally looks to kick into high gear. Though today’s slate of deals is intriguing, investors should always be ready with dry powder on the sidelines to take advantage of the inevitable corrections that could come our way over the next year.

Let’s consider two dividend stocks that I view as absolute rock stars. They look cheap, sport handsome dividend yields, and seem likely to increase their payouts gradually over time.

Scotiabank

Scotiabank (TSX:BNS) stock has been in the penalty box for well over a year now, thanks in no part to its emerging markets exposure, which has been a larger source of risk than reward for the bank.

As the world economy recovers, I do think the emerging markets banking business could start doing more of the heavy lifting. Indeed, emerging markets entail higher risk, but for a shot at greater rewards. As Canada’s most international bank, I think Canadian investors seeking to expand their geographic horizons ought to strongly consider picking up a few shares while they’re so heavily discounted. At the end of the day, I believe Canadian investors should seek to diversify internationally, rather than stay 100% in Canadian equities.

The stock recently bounced 8% off its October lows. Whether it’s the start of a bigger upside move remains to be seen. In any case, I view the stock as cheap at 9.5 times trailing price-to-earnings (P/E). The 7.04% dividend yield is also incredibly enticing, and unlikely to last should BNS stock continue to recover.

TC Energy

TC Energy (TSX:TRP) is a pipeline firm that doesn’t get nearly as much respect as some of its higher-yielding peers. At around $50 per share, the stock yields 7.47%. And it’s a relatively safe payout that could keep growing as the firm moves past industry headwinds. Undoubtedly, the midstream energy space is out of favour, but it’s a great place to look if you seek big passive income at a modest price.

The stock is around 33% below its 2022 highs. The recent bounce is encouraging, but it’s too soon to deem that shares have bottomed out. Either way, I think the stock is worth stashing in a long-term income fund.

Finally, TC Energy doesn’t have as much leverage and rate risk relative to some of its more indebted rivals in the space. This bodes very well for the firm’s dividend health.

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 recommends Bank of Nova Scotia. The Motley Fool has a disclosure policy.

More on Dividend Stocks

dividends grow over time
Dividend Stocks

1 Magnificent Dividend Stock That’s Down 10% and Trading at a Once-in-a-Decade Valuation

This dividend stock may be down around 10%, but there is a huge future opportunity for those wanting growth as…

Read more »

Canada national flag waving in wind on clear day
Dividend Stocks

RRSP Must-Haves: 2 Canadian Stocks to Secure Your Future

The TSX’s dividend pioneer and first Dividend King are must-haves in an RRSP to ensure financial security in retirement.

Read more »

stock research, analyze data
Dividend Stocks

How Much to Invest to Get $500 in Dividends Every Month

TSX dividend stocks such as Enbridge, TD Bank, and Telus, can help you earn $500 in monthly dividend payments.

Read more »

Golden crown on a red velvet background
Dividend Stocks

Dividend Powerhouses: Canadian Stocks to Fuel Your Portfolio

These two top Canadian dividend aristocrats are some of the top stocks on the TSX to buy now and hold…

Read more »

Dial moving from 4G to 5G
Dividend Stocks

This Undervalued Dividend Stock is Worth Buying Right Now

Want an undervalued dividend stock with long-term potential and a juicy yield? Here's an option you may regret not buying…

Read more »

A worker gives a business presentation.
Dividend Stocks

1 Stock I’m Buying Hand Over Fist in July Despite the Market’s Pessimism

This top dividend stock is going through a rough patch, but don't let that count out all the growth we've…

Read more »

person on phone leaning against outside wall with scenic view at airbnb rental property
Dividend Stocks

2 TSX Stocks Poised to Have a Big Summer

Restaurant Brands International (TSX:QSR) stock and another darling that could be too cheap to ignore this summer.

Read more »

HIGH VOLTAGE ELECRICITY TOWERS
Dividend Stocks

Forget Fortis Stock: Buy This Magnificent Utilities Stock Instead

Looking for high dividends and returns? Then I'm sorry, but Fortis (TSX:FTS) stock probably isn't for you.

Read more »