Finding cheap Canadian stocks can present significant opportunities for value investors, especially when those come with a high dividend yield. As of recent market analyses, nearly 25% of stocks on the TSX have a price-to-earnings (P/E) ratio below 15, which is often considered a benchmark for undervalued stocks. So, let’s look at three offering substantial 7% dividend yields right now!
SmartCentres
SmartCentres Real Estate Investment Trust (TSX:SRU.UN) is a strong company on the TSX due to its robust portfolio of retail properties, which are anchored by high-quality tenants like Walmart. The real estate investment trust (REIT) benefits from stable cash flows and a diversified tenant base, reducing risk. Additionally, its focus on mixed-use developments, such as the SmartCentres Place in Vaughan, positions it for long-term growth.
SmartCentres REIT’s earnings have shown strength due to several key factors. The company has seen improved occupancy rates, with 272,000 square feet of previously vacant space leased in the second quarter (Q2) of 2024, pushing the occupancy rate to 98.2%. Plus, SmartCentres has successfully expanded its mixed-use development pipeline, with projects like The Millway achieving high occupancy rates above budgeted rental rates.
SmartCentres is also a valuable dividend stock primarily due to its strong and stable dividend yield of 7.72%, which is well above the market average. The REIT’s price-to-book ratio of just 0.78 indicates that it is trading at a discount relative to its asset value. Furthermore, the company’s robust operating margins of 54.39% and significant cash flow generation of $334.31 million in operating cash flow provide the necessary liquidity to support its dividend payments.
NorthWest
NorthWest Healthcare Properties Real Estate Investment Trust (TSX:NWH.UN) stands out as a strong company due to its strategic focus on the resilient healthcare real estate sector, which benefits from stable demand irrespective of economic cycles. Its properties are primarily leased to leading healthcare operators under long-term, inflation-indexed contracts, ensuring consistent and predictable income streams.
NorthWest recently demonstrated its strength through the strategic sale of its U.K. portfolio for £500 million ($885 million), a move that underscores its commitment to streamlining operations and strengthening its financial position. The sale, executed at a favourable 5.9% cap rate, enables the REIT to significantly reduce its debt by $690 million. This improved its balance sheet and positioned the company for long-term stability.
NorthWest is a valuable dividend stock due to its attractive dividend yield and strong potential for long-term income. With a forward annual dividend yield of 7.14% and a trailing annual yield of 10.77%, it offers investors significant income relative to its market price. The REIT’s low price-to-book ratio of 0.65 suggests it is undervalued. Although the payout ratio is high at 299.44%, the REIT’s substantial cash flow and ongoing strategic adjustments, such as asset sales to reduce debt, indicate a commitment to maintaining its dividend and improving its financial health over time.
Birchcliff
Birchcliff Energy (TSX:BIR) is a strong company due to its solid position as a low-cost natural gas producer with a robust asset base in the prolific Montney Formation. The company is known for its strong operational efficiencies, maintaining a low production cost structure, which allows it to generate significant free cash flow even in a volatile commodity price environment.
Birchcliff Energy is a strong company following its recent first-quarter earnings report, which demonstrated its operational efficiency and adaptability in a challenging market environment. The company achieved solid production results, driven by the strong performance of its wells. Despite lower natural gas prices impacting revenue, Birchcliff maintained a disciplined capital program and kept its production guidance intact while adjusting its drilling plans to optimize capital efficiency.
Birchcliff Energy is a strong dividend stock due to its attractive dividend yield, which currently stands at 7.12% forward annual yield. Despite recent challenges reflected in its operating margins and a decline in revenue growth, Birchcliff maintains a strong position with a solid cash flow. Additionally, the company has a manageable debt level with a total debt-to-equity ratio of 20.12%, which provides some financial stability, reinforcing its potential as a reliable dividend stock.
