The Bank of Canada has cut its benchmark interest rates twice this year. Analysts are expecting one more cut this year. Amid falling interest rates, dividend stocks have become attractive means to earn a stable passive income. Against this backdrop, let’s look at three cheap dividend stocks that can boost your passive income.
Canadian Natural Resources
Canadian Natural Resources (TSX:CNQ) is an oil and natural gas producer with assets in Western Canada, the North Sea, and Offshore Africa. Its high-value reserves and diversified assets have generated stable and predictable cash flows, thus allowing it to raise its dividends for 24 consecutive years at an annualized rate of 21%. It currently pays a quarterly dividend of $0.525/share, with its forward dividend yield at 4.2%.
With oil prices cooling down substantially from their April highs, CNQ has lost 11.7% of its stock value compared to its 52-week high. The pullback has dragged its valuation down, with the company currently trading at an NTM (next 12 months) price-to-earnings multiple of 12.7. Further, the International Energy Agency is projecting oil demand to increase by 3.2 million barrels per day compared to its 2023 levels unless there are significant policy changes. Rising oil demand could support elevated oil prices.
Besides, CNQ has planned to make a capital investment of $5.4 billion this year, boosting its production. Increased production and elevated oil prices could boost its financials. Further, with the company’s debt falling below its target of $10 billion, it expects to return 100% of its free cash flows to its shareholders, thus making its future dividend payouts safer.
Northland Power
Second on my list would be Northland Power (TSX:NPI), which builds, owns and operates clean energy facilities across Asia, Europe, and America. Earlier this month, the company reported a healthy second-quarter performance, with its revenue and adjusted EBITDA growing by 12.1% and 15.5%, respectively. Higher wind resources more than offset a decline in revenue generated from its Canadian solar facilities to drive its financials.
Meanwhile, NPI continues to construct its two offshore projects in Taiwan and Poland, as well as an energy storage project in Canada. The management expects to complete these projects over the next couple of years. Amid these development projects, management expects its adjusted EBITDA to grow at an annualized rate of 7-10% through 2027. Besides, the company is pursuing other opportunities with a total developmental pipeline of 9 gigawatts. Given its healthy long-term growth prospects, I believe the NPI’s future dividend payouts are safer.
Meanwhile, NPI currently pays a monthly dividend of $0.10/share, with its forward yield at 5.4%. NPI stock’s valuation also looks attractive, with its NTM price-to-earnings multiple at 14.3.
NorthWest Healthcare Properties REIT
My final pick would be NorthWest Healthcare Properties REIT (TSX:NWH.UN), which operates 186 healthcare properties across seven countries. The company enjoys healthy occupancy and collection rates due to its long-term lease agreements with government-backed tenants. Besides, the company recently sold its portfolio in the United Kingdom for $885 million, thus completing its previously announced strategic review process.
Since the inception of its non-core assets sales program, the company has divested around $1.4 billion of non-core assets, utilizing the net proceeds from these sales to lower its leverage. Further, the REIT has planned to develop next-gen assets, which could create long-term earnings growth, thus allowing it to continue rewarding its shareholders with healthy dividends. NWH.UN currently pays a monthly dividend of $0.03/share, with its forward yield at 7.5%. Also, its valuation looks attractive, with its price-to-book multiple at 0.7.
