Growth-to-Value Rotation? 2 Top Income Stocks That Could Rise in 2024

National Bank of Canada (TSX:NA) and another top financial that value investors should appreciate in 2024.

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After a hot year for tech stocks, some investors may be wondering if the market rally is poised to broaden out and begin rewarding the boring value plays. Indeed, mega-cap technology is not the only thing to invest in, folks! Though mega-cap tech seems to be best at putting their economies to scale to work effectively, there are a multitude of value plays, many of which may be severely undervalued.

I have no idea if a rotation from growth to value is in play for 2024. Only time will tell what trajectory certain baskets of stocks will take. The possibility exists that mega-cap tech and value plays can shine. Either way, let’s have a closer peek at two income stocks that I believe are too cheap and could appreciate through the year, regardless of which sectors stand to shine next.

IA Financial

IA Financial (TSX:IAG) is a Canadian insurance firm that I view is one of the most interesting value plays in the financial sector that’s probably off the radar of most new investors. What attracts most investors to financial stocks? Dividend yield and modest valuation multiples are two likely top answers. After a turbulent year for financials, there’s no shortage of value across the banking and insurance scenes. Further, yields north of 5% are now no longer mouth-watering, not with high rates on risk-free assets.

IAG stock’s modest 3.44% dividend yield looks relatively less appealing through the eyes of the income-hungry. Still, I believe IAG stock is one of the best-run insurers in Canada, with one of the cheapest multiples out there. And, of course, the dividend isn’t that unappealing when you consider its relative stability.

At writing, IAG shares go for $88 and change. At 7.7 times trailing price-to-earnings (P/E), the stock also looks absurdly cheap. Right now, shares are down around 6% from their highs. I think the dip is worth pursuing if you value more than just yield.

National Bank of Canada

National Bank of Canada (TSX:NA) is another financial stock that may be overlooked for the yield heavyweights. At $100 and change, NA stock trades at 10.7 times trailing P/E, alongside a 4.17% dividend yield. It’s cheap and has a juicy yield. But compared to its banking peers? It’s not all too remarkable.

When you consider NA stock has enjoyed nearly 70% in gains over the last five years, only then does it become apparent that National Bank may be a better bet than its Big Six peers. National Bank may be a smaller player, but it’s one that can effectively compete with much larger rivals. In that regard, NA stock is a deep-value play that deserves more respect from everyday value investors.

What’s most remarkable about NA is the fact that it’s just 3.85% away from hitting its all-time high. How many bank stocks are still off 20% or more from all-time highs? National Bank has become a bank that can sail through even the roughest seas in the banking scene. As such, I believe the current valuation undervalues the company by a considerable amount.

Bigger is not always better. Sometimes, the smaller dark horse can end up shining brightest for your portfolio!

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 has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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