My 2 Favourite Stocks to Buy Right Now

These sold-off stocks offer generous income and the potential for a turnaround over the next three to five years.

| More on:

Image source: Getty Images

I like shopping for value. So, when I see stocks that are out-of-favour with the market, I take a closer look. Here are a couple of stocks that appear to be low-hanging fruits that could deliver good returns for patient investors with a long-term investment horizon. Importantly, the stocks pay out decent dividend income, while investors wait for price appreciation.


RioCan REIT (TSX:REI.UN) was in a downward trend last year. The retail real estate investment trust (REIT) seems to have finally bottomed around $16 per unit in October. It has now rebounded to $18.60 per unit at writing, which is still a decent area to pick up shares even just for income.

The Canadian REIT yields 5.8%, which is paid out in monthly cash distributions. This cash distribution has good coverage as its 2023 funds from operations payout ratio is estimated to be approximately 61%, which is low compared to its peers. Although it’s primarily in retail real estate, it maintains a high occupancy across its resilient portfolio.

The stock also trades at a discount multiple of roughly 10.5 times funds from operations. Coupled with potential valuation expansion and growth prospects from its project pipeline, it might surprise the investing community by delivering total returns of close to 12% per year over the next five years.

Capital Power

Capital Power (TSX:CPX) is a growth-oriented power producer in North America. Sure enough, it has delivered higher dividend growth versus its peers. For your reference, its five-year dividend growth rate is 6.7%. And its last dividend hike was 6% in August.

It has an operating capacity of about 7,700 MW across 30 facilities, using natural gas as the primary source of energy, followed by renewables (wind and solar). The adjusted EBITDA, a cash flow proxy, diversification is about 65% natural gas and 35% renewables.

In November, it announced the acquisition of two key gas assets, La Paloma in California and Harquahala in Arizona, which management expects to be immediately accretive with an average accretion of 8% from 2024 to 2028 for its adjusted funds from operations, on a per-unit basis. Specifically, Capital Power owns a 50% interest in Harquahala – the other 50% is owned by BlackRock Infrastructure. Capital Power is responsible for operating the asset and earns a management fee for doing so.

Capital Power maintains an investment-grade S&P credit rating of BBB-. Management highlighted that the transaction continues the utility’s history of acquiring accretive gas assets with attractive contracts in growing electricity markets.

The stock tends to experience more ups and downs than its peers. Therefore, it could be a good buy on market corrections for a turnaround. Indeed, the dividend stock has declined about 19% over the last 12 months and now offers an attractive dividend yield of 6.5%.

Capital Power’s latest dividend growth guidance is 6% per year to 2025. At the recent price of $37.67 per share, the analyst consensus 12-month price target represents a discount of almost 18%. Even assuming no valuation expansion, we can approximate total returns of more or less 12% per year over the next couple of years.

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 Capital Power and RioCan Real Estate Investment Trust. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Construction work on a site
Dividend Stocks

2 Engineering & Construction Stocks You Can Buy and Hold for the Next Decade

Two prominent engineering and construction stocks are buying opportunities before the industry rebounds and grow in the next decade.

Read more »

Canadian Dollars
Dividend Stocks

For a Shot at $5,000 in Annual Passive Income, Buy 1,975 Shares of This TSX Stock

Are you looking to earn steady income? While there is no certainty in stocks, this stock can give you a…

Read more »

Target. Stand out from the crowd
Dividend Stocks

1 Magnificent Canadian Dividend Stock With 33% Upside to Buy and Hold Forever

Dividend stock Brookfield Business Partners LP (TSX:BBU.UN) is a powerhouse of growth, with even more to come in 2024.

Read more »

top TSX stocks to buy
Dividend Stocks

Passive Income: How Much to Invest to Get $6,000 Each Year

TSX energy stocks such as Enbridge can help you earn a passive stream of recurring income.

Read more »

protect, safe, trust
Dividend Stocks

Income Investors: 2 Safe Dividend Stocks to Own for Passive Income for Years

Long-term passive-income stocks should ideally offer enough dividend growth to counteract inflation while preserving or growing your capital.

Read more »

analyze data
Dividend Stocks

The 1 Best Growth Stock on the TSX Today

Fairfax Financial Holdings (TSX:FFH) stock took a hit, but it's still a great growth play for the long-term.

Read more »

Happy family father of mother and child daughter launch a kite on nature at sunset
Dividend Stocks

Got $10,000? That’s All the Start-Up Funds You Need to Get Money for Doing Nothing 

Have you been delaying long-term investments for later? Investing money while you are working can help money work for you.

Read more »

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Dividend Stocks

Buy 32 Shares in This Glorious Dividend Stock and Create $1,074.88 in Passive Income

This dividend stock is also a growth stock you're going to want on your side over the next year and…

Read more »