There are discounted stocks in almost any given market, though the numbers can vary significantly based on the state of that market. In bull markets, the number of discounted stocks is relatively lower. It’s pretty high when the market has crashed or is appropriately bearish.
While the current market fluctuates between the two, there are at least three stocks you’ll be glad you bought at their current discounted prices.
An energy stock
The energy sector in Canada is responding to the weak market and lower oil prices and has fallen 10% in about ten days. However, one energy stock has been bearish for a lot longer than that.
Parex Resources (TSX: PXT) has been going down at an alarming rate since 2023 and has fallen over 52% from last year’s peak. Lower production guidance and management changes are contributing to this slump.
However, the stock also has a few good things going for it. It wasn’t inflated like the other energy stocks in the post-pandemic bullish energy market, so the chances of it escaping a sector-wide correction are low.
It’s currently trading at a very attractive price-to-earnings ratio of 3.1. Most importantly, it’s offering financially stable dividends (with a very healthy payout ratio) at an incredibly high yield of 11.7%. This makes it one of the most attractive discounted stocks on the TSX.
A telecom stock
BCE (TSX: BCE) is the Canadian telecom giant that is currently reeling from the slump that the entire telecom sector fell into after some regulatory challenges. Despite a decent uptick of about 13% in just over two months, the stock is still trading at a 34% discount from its 2022 peak. This has resulted in an excellent 8.2% yield from this well-established aristocrat.
Many of the factors that led to the original slump are still there. The company cut many jobs earlier this year and plans to sell some of its assets as well. This restructuring may strengthen the company’s position in the current relatively weak market and help it benefit from tomorrow’s opportunities. The Internet of Things (IoT) is foremost among them, though it has yet to materialize fully.
A bank stock
Bank of Nova Scotia (TSX: BNS) has lagged behind in the recovery compared to others in the Big Six, and it’s still trading at a 26% discount from the 2022 peak. However, the bank stock has also picked up its recovery pace and has risen over 11% since mid-August. Thanks to its steep discount, the yield is still at an attractive level — 6.1%, the highest among the Big Six bank stocks.
While the yield is reason enough to buy this stock at the current price, the rapid capital appreciation is also worth considering. If the stock maintains that bullish trend to reach new highs, it can generate significant collective returns (dividends and growth). The current valuation is a bit above fair, but that’s reasonable considering its growth.
Foolish takeaway
Two of the three stocks offer a healthy combination of high dividends and short-term capital-appreciation potential. BCE and the Bank of Nova Scotia are recovering, and you need to make a quick decision to lock in the high yield. But Parex is still slumping, and you may consider letting it reach rock bottom before buying.
