3 Cheap Dividend Stocks to Boost Your Passive Income

These three cheap dividend stocks are stellar options for those looking for growth in shares, while also collecting sweet passive income.

Amy Legate-Wolfe

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote: “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published July 11, 2024 9:30 pm EDT

Investing in cheap dividend stocks can be a strategic way to enhance your portfolio’s income potential while positioning yourself for capital appreciation. These stocks offer attractive dividend yields and are trading at relatively low prices, making them a compelling option for investors looking to maximize returns without taking on excessive risk.

Today, we’re going to cover three cheap dividend stocks that fit the bill. Trading at cheap valuations and with stellar dividend yields, let’s get right into them.

Paper Canadian currency of various denominations — Source: Getty Images

Manulife

Manulife Financial (TSX:MFC) presents a compelling opportunity for investors, thanks to its impressive financial performance and attractive valuation metrics. The company recently reported a substantial 61% increase in full-year revenue, reaching $27.2 billion, while its net income more than doubled from $2.2 billion to $4.8 billion. These robust financial results highlight Manulife’s strong operational efficiency and strategic growth initiatives.

One of the standout features of Manulife’s stock is its low price-to-earnings (P/E) ratio of 15.88. This valuation suggests that the stock is currently undervalued, offering investors a chance to buy into a high-quality company at a discount. Additionally, analysts project continued earnings growth, with a consensus estimate for 2024 at $2.66 per share, representing an 8.8% year-over-year increase. This anticipated growth further enhances the stock’s appeal, providing a strong case for its potential appreciation.

Income-focused investors will find Manulife’s dividend yield particularly attractive. The company offers a sustainable dividend yield of 4.35%, making it an excellent choice for those seeking steady income. This high yield, combined with the stock’s undervaluation and growth prospects, makes Manulife a well-rounded investment option.

Russel Metals

Another strong, cheap dividend stock is Russel Metals (TSX:RUS) due to its strong financial performance, attractive valuation, and solid dividend yield. Russel Metals has demonstrated consistent revenue growth, achieving $1.1 billion in revenue for the first quarter (Q1) of 2024. Despite a slight miss in earnings per share (EPS) at $0.82 compared to the expected $0.83, the company’s financial stability remains strong with a healthy balance sheet and robust cash flow. The net income for Q1 2024 was $49.7 million, showcasing a 5.3% increase from the previous quarter.

The company is advancing several value-added processing initiatives across its service centre network, which are expected to generate attractive returns and support future growth. Analysts maintain a “Moderate Buy” consensus rating, reflecting confidence in Russel Metals’ ongoing performance and growth potential.

Russel Metals offers a compelling dividend yield of approximately 4.77%, with a quarterly dividend of $0.42 per share. This dividend has been consistent and is backed by the company’s strong earnings and cash flow. Over the last five years, the total shareholder return has been 139%, indicating that dividend reinvestments have significantly boosted overall returns.

TC Energy

Finally, TC Energy (TSX:TRP) is another strong option for investors looking at cheap dividend stocks. In the first quarter of 2024, TC Energy reported significant growth, with net income reaching $1.2 billion, or $1.16 per share, slightly down from $1.29 per share in the previous year. The company achieved revenue for the same period of $4.24 billion, up from $4.04 billion in the fourth quarter of 2022.

TC Energy’s strategic moves include the sale of its Prince Rupert Gas Transmission entities and the spinoff of its Liquids Pipelines business, which is expected to unlock further value. The company also completed a $5.3 billion sale of a 40% stake in its Columbia Gas and Columbia Gulf systems, which has helped streamline operations and reduce debt.

One of the key attractions of TC Energy is its substantial dividend yield. Currently, the stock offers a yield of 7.51%, making it an appealing choice for income-focused investors. The company declared a quarterly dividend of $0.96 per share for the quarter ending June 30, 2024. This consistent dividend growth reflects TC Energy’s commitment to returning value to shareholders.