Powerful passive-income investments are going for quite cheap these days, with high interest rates continuing to weigh heavily on some of the yield-heavy plays on the market. Undoubtedly, rates won’t stay high forever. In fact, they could begin to descend going into the second half as the inflationary struggle shows some signs of easing.
In any case, passive-income investors may find it more worthwhile to pursue some of the dividend and distribution payers while their yields remain swollen. Once the Bank of Canada begins cutting rates, the yields on today’s passive-income plays may not be so generous. And the price you’ll have to pay to get into the shares may go way up.
Let’s examine two powerful and cheap income stocks that investors may wish to add to their watchlists as we head into June.
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Restaurant Brands International
Restaurant Brands International (TSX: QSR) stock has been getting crushed of late, alongside many other firms in the fast-food scene. Personally, I think the correction in shares is overblown, perhaps beyond proportion, when you consider the solid quarterly showing back in late April. Additionally, it looks like management isn’t done with the modernization efforts over at Burger King, with $300 million more to be invested in remodelling some of its locations.
Indeed, the fast-food landscape has been quite unforgiving, but QSR stock, I thought, had risen to the occasion. Moving ahead, I’d look for high-value menu items (think Flatbread Pizzas over at the local Tim Hortons) to start attracting customers. Indeed, Tim Hortons pizza probably won’t put the pizza giants on notice, but they are an intriguing and novel menu item. Despite the low price, the Tim Hortons pizzas are actually not bad. In fact, they’re actually really good and convenient for those on the go.
In any case, I continue to be intrigued by the moves made by QSR’s managers. With a nice growth plan, a 3.26% dividend yield, and a cheap 18.43 times trailing price to earnings (P/E) multiple, perhaps it’s time to add to a position on the latest dip, which I view as overdone.
Rogers Communications
Rogers Communications (TSX: RCI.B) stock may boast the highest dividend yield right now. In fact, it’s at a shocking low of 3.68%, well below that of its Big Three telecom rivals. Either way, the stock is down more than 27% from its 2022 highs. And with an 11.7 times forward P/E, the telecom and media firm actually looks a tad on the cheap side.
As the company continues to bring out the best in Shaw Communications, we may just see RCI.B stock get the boost it needs to rise out of a multi-year rut. Thus far, Rogers has realized a good amount of synergy savings from the deal. Looking ahead, I’d look for more benefits to follow as Rogers and Shaw look to prove they’re stronger together. In any case, I don’t think there’s any denying just how dominant the firm has become following its merger with Shaw.
In the meantime, media and interest rate-related headwinds could continue to pull down the stock. If you’re in it for the long run, though, such weakness may be more of an opportunity for those seeking dividends and impressive dividend growth.
