Got $5,000? Buy and Hold These 3 Value Stocks for Years

These three value stocks that pay good income can deliver respectable total returns over the next three to five years.

If you have an extra $5,000 on hand, you might consider putting some in value stocks that pay good income. Check out these three interesting ideas.

Image source: Getty Images

Manulife is still a value stock

Wow! Manulife (TSX: MFC) stock just experienced a breakout. A few months ago, it was trading at the $23-26 range. It is up about 30% from that level. And get this — at the recent price of $32.50 per share, it is still a value stock trading at a blended price-to-earnings ratio (P/E) of approximately 9.3. This remains a low P/E for its anticipated earnings-per-share growth rate of roughly 7% over the next few years.

Manulife is an international life and health insurance company that has kept its adjusted earnings per share stable or growing every year since 2012. This is a pretty decent record. Later, in 2014, when management was sure that the business had turned around after the global financial crisis of 2007-2008, it began increasing its dividend.

Its 10-year dividend-growth rate of 10.9% is nothing to sneeze at, as it roughly 2.5 times shareholders’ dividend income in the period. It currently offers a nice dividend yield of 4.9%.

Grab a 6.6% dividend from Bank of Nova Scotia

Like Manulife, Bank of Nova Scotia (TSX: BNS) is also a value stock in the financial services sector. However, the international bank hasn’t started turning around yet. In fact, it has been in a downtrend since peaking in early 2022.

Stock price follows earnings. Its revenue has remained resilient and growing over the last few years. Unfortunately, it got hit by higher costs, which weighed on earnings. Particularly, in the last fiscal year, its interest expense jumped $23 billion. Additionally, its non-interest expense climbed 12% to $19 billion.

Earnings were further pressured by the provision for credit losses of 2.5 times year over year, as the bank expects a higher percentage of bad loans in a general environment of higher interest rates and inflation.

What’s amazing is that even with all the negative pressures, Bank of Nova Scotia’s earnings still covers its dividend, although its payout ratio is higher than the normal range of about 50%. This fiscal year, its payout ratio is estimated to be around 65%. At the recent price of $64 per share, the bank stock trades at about 9.8 times adjusted earnings. It offers a rich 6.6% dividend yield and the potential for a multi-year turnaround.

RioCan REIT offers value and monthly income

RioCan REIT (TSX: REI.UN) is another value stock that’s out of favour. The retail real estate investment trust (REIT) stock is still in a downtrend after it fell from grace during the pandemic market crash in 2020. To be clear, the stock did have a run-up after the market crash. From the bottom in the $14 range, it climbed to the $25 level for upside of about 78%. Here’s another chance to buy the stock on the cheap and wait for potential multi-year price appreciation while receiving good monthly income.

Its resilient portfolio of income-producing real estate properties maintains a high committed occupancy rate of 97.4%. For the retail properties alone, the committed occupancy is even higher at 98.4%, which RioCan noted is 1.2% higher than the pre-pandemic levels. In 2023, for the third year in a row, the REIT experienced same-property net operating income growth target of 3%. Last year, it was 4.8%.

For all we know, the REIT units could stay pressured until interest rates start falling. In an interest rate cut environment, it would have a higher chance of returning to the $25 range again. At $18.67 per unit at writing, it offers a cash distribution yield of close to 6%.

Fool contributor Kay Ng has positions in Bank of Nova Scotia and RioCan Real Estate Investment Trust. The Motley Fool recommends Bank Of Nova Scotia. The Motley Fool has a disclosure policy.

More on Dividend Stocks

The letters AI glowing on a circuit board processor.
Dividend Stocks

Canada Is Joining Europe’s Supercomputing Network: Is Celestica Stock the Best Way to Invest?

Celestica sells the infrastructure behind heavy computing demand, with an earnings case that reaches beyond one European programme.

Read more »

Woman in private jet airplane
Dividend Stocks

A Canadian Company Just Won a $44 Million European Defence Contract: This TSX Aerospace Stock Could Be Next

Galvion’s Latvia order shows Canadian suppliers can win European work, while Bombardier has a separate defence opportunity.

Read more »

Group of people in a line at an ATM waiting to make a cash withdrawal
Dividend Stocks

The Bank of Canada Is Worried About Inflation: These 2 Stocks Might Not Be

The Bank of Canada’s recent rate hike aims to contain rising inflation, but two large-cap stocks can endure this new…

Read more »

hand stacks coins
Dividend Stocks

3 High-Yield Dividend Stocks to Buy and Hold for a Decade of Income

These three high-yield dividend stocks are ideal for long-term income-seeking investors.

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

How to Use a TFSA to Generate an Average of $367 in Monthly Tax-Free Income

A TFSA can pay Canadians roughly $350 a month tax free. Learn how Enbridge and Royal Bank dividends could build…

Read more »

A worker gives a business presentation.
Dividend Stocks

Inflation Is Heading to 3.5%: Yet These 2 Canadian Stocks Can Raise Prices and Keep Their Customers

Inflation is heading toward 3.5% in Canada. See how two TSX stocks, CN Rail and Enbridge, pass on higher costs,…

Read more »

Business doodle about dividends on chalkboard
Dividend Stocks

This Dividend Stock Is Down 13% in the Past Year, but the Payout Looks Safe

A 13% share-price decline has lifted this dividend stock’s yield to 6.8%, while strong liquidity and recurring revenue continue to…

Read more »

Agricultural irrigation sprinkler gun spraying water
Dividend Stocks

How to Diversify Your Portfolio Beyond Canadian Banks

These top TSX stocks could help you move beyond bank-heavy portfolios without giving up established businesses and dividends.

Read more »