3 Best Dividend Stocks to Buy This Holiday Season

TSX dividend stocks such as Bank of Montreal are trading at a significant discount to consensus price target estimates.

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The holiday season is here, with the much-awaited Cyber Monday shopping festival set to launch today. While inflation and rising costs may result in lower consumer spending in 2023, you can still gift yourself cheap dividend stocks trading at a discount.

Here are the three best TSX dividend stocks you can buy this holiday season.

Gildan Activewear

Valued at $8.5 billion by market cap, Gildan Activewear (TSX:GIL) manufactures and sells apparel products in North America and other international markets. Despite a challenging environment, Gildan Activewear benefits from a strong competitive position given its vertically integrated manufacturing platform.

In Q3 2023, the company increased sales by 2% to $870 million on an operating margin of 18.1%. Its operating cash flow stood at $305 million, while free cash flow was lower at $265 million.

Gildan Activewear pays shareholders a quarterly dividend of $0.255 per share, indicating a forward yield of 2.1%. With a payout ratio of less than 30%, the leisure wear company has increased its dividends by 19% annually in the last 12 years.

Priced at 14.5 times forward earnings, GIL stock is quite cheap and trades at a discount of 5% to consensus price target estimates.

Magna International stock

An automobile ancillary company, Magna International (TSX:MG) is a TSX giant valued at $21.3 billion by market cap. Trading 40% below all-time highs, Magna offers you a dividend yield of 3.4%.

Magna reported revenue of $10.7 billion in Q3, an increase of 15% year over year. Comparatively, global light vehicle production rose 4% in the September quarter. It ended Q3 with adjusted EBIT (earnings before interest and tax) of $615 million compared to $452 million in the year-ago period.

Magna emphasized its operational efficiencies and cost initiatives drove earnings growth, in addition to top-line expansion. Moreover, its EBIT rose due to higher customer recoveries net of production input costs.

Priced at 10 times forward earnings, Magna International is very cheap, given its forecast to grow adjusted earnings by 37% annually in the next five years. Analysts tracking the TSX dividend stock expect shares to rise by 32% in the next 12 months.

Bank of Montreal stock

The final dividend stock on my list is Bank of Montreal (TSX:BMO), which currently provides shareholders a yield of 5.3%. A tepid lending environment and the threat of rising delinquencies amid interest rate hikes have driven shares of BMO lower by 28% from all-time highs.

In fiscal Q3 2023 (ended in July), BMO reported adjusted net income of $2 billion, or $2.78 per share. It ended the quarter with record sales in the Canadian Personal and Commercial Banking businesses. Moreover, the Bank of West acquisition drove pre-provision pre-tax growth in Q3.

BMO is among the largest banks in Canada and offers you a dividend yield of 5.3%. These payouts have risen by 7.9% annually in the last 25 years, showcasing the resiliency of its cash flows across market cycles.

Valued at less than 10 times forward earnings, BMO stock trades at a discount of 15% to consensus price target estimates.

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 Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool recommends Gildan Activewear and Magna International. The Motley Fool has a disclosure policy.

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