2 Cheap Dividend Stocks to Buy as the TSX Just Keeps Climbing Higher

Consider Bank of Montreal (TSX:BMO) and another cheap dividend player, which could continue to rise into year-end.

| More on:
space ship model takes off

Source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

As the TSX Index looks to continue its bullish run, long-term investors may wish to pick up shares of their favourite dividend payers before the price of admission has a chance to rise even higher. Indeed, the Canadian stock market’s hot run could certainly kick into high gear as we exit one of the ugliest seasonal periods for the market.

Indeed, just because September is coming to a close does not mean investors should neglect the defensive parts of their portfolio. Arguably, the bout of July-September choppiness could carry into year’s end. In any case, this piece will check in on two impressive dividend stock picks that still look to be a tad on the undervalued side going into October.

Moreover, each name looks like a relatively stable bet for investors worried that another correction could be in the cards yet again. After such a prominent melt-up, investors should be a tad more cautious and insist on scoring stocks at relative discounts.

When it comes to cheap dividend stocks, the banks immediately come to mind. While many of them are chasing new all-time highs again, some are still attempting to lift themselves off the canvas after being pummelled over the past two-and-a-half years. While the bank stocks won’t be everyone’s cup of tea (they’ve been rather risky, choppy plays since the COVID pandemic began), I think they’re worth grabbing if you have a long-term horizon and seek to be paid a generous dividend for your time.

Bank of Montreal

Bank of Montreal (TSX:BMO) is one of those Canadian banks that’s seen its U.S. business work against it of late. While the U.S. market stands out as a compelling source of long-term growth for Canadian banks, recent macro headwinds have really caused investors to send banks with U.S. exposure to the penalty box. After a pretty bad quarterly showing, BMO stock finds itself in limbo, stuck down around 20% from its all-time high not seen since the start of 2022.

Despite dragging its feet for just over two years, I view BMO stock as a top catch-up trade for investors looking to bank on the big banks by the end of the year. At writing, shares go for a modest 14.1 times trailing price to earnings (P/E). It’s not a massive bargain, but it’s also not too expensive, especially given the bounce-back potential and the fat 5.1% dividend yield.

Created with Highcharts 11.4.3Bank Of Montreal PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

Northland Power

Northland Power (TSX:NPI) is a top deep-value pick for investors eager to take advantage of the recent pullback in the green energy plays. Indeed, higher rates and political uncertainties have made for a rather uncomfortable ride.

Still, most of Northland’s woes can be and likely will be solved in the coming years. The company is on track to stick with its full-year guidance as a number of its projects move right along. Of course, offshore wind generation projects can be rather expensive.

However, as rates fall, I view Northland as one of the firms poised to catch a break. Today, the stock is off more than 53% from its high with a 5.12% dividend yield.

Created with Highcharts 11.4.3Northland Power PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

Should you invest $1,000 in Bank of Montreal right now?

Before you buy stock in Bank of Montreal, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Bank of Montreal wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $20,697.16!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 29 percentage points since 2013*.

See the Top Stocks * Returns as of 3/20/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joey Frenette has positions in Bank Of Montreal. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Dividend Stocks

dividend growth for passive income
Dividend Stocks

Why I’d Invest in Canadian Value Stocks for Both Stability and Growth

Three Canadian value stocks are buying opportunities for investors looking for stability and growth.

Read more »

investment research
Dividend Stocks

Got $15,000? 3 Blue-Chip Stocks Every Canadian Should Consider

Here's why investing in blue-chip TSX stocks such as CNQ and CNR should derive outsized gains in 2025 and beyond.

Read more »

protect, safe, trust
Dividend Stocks

Where I’d Allocate $20,000 in 2 Safer High-Yield Dividend Stocks for Retirement Needs

Here are two safer, high-yield dividend stocks I'm looking at for my retirement needs.

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

3 Reasons I’m Considering Enbridge Stock for a $5,000 Investment This April

I'm considering Enbridge stock to provide some defensive appeal and a juicy dividend to my long-term portfolio.

Read more »

monthly desk calendar
Dividend Stocks

A 9.2% Dividend Stock Paying Cash Every Single Month

With one of the highest dividends out there, this dividend stock deserves attention in your portfolio.

Read more »

Happy golf player walks the course
Dividend Stocks

Build a Powerful Passive Income Portfolio With Just $20,000

If you are worried that the bear market could reduce your savings, these stocks can build a powerful passive income…

Read more »

Hand Protecting Senior Couple
Dividend Stocks

How I’d Use My $7,000 TFSA Contribution to Start Retirement Planning

These TSX stocks have solid fundamentals and are well-positioned to deliver significant tax-free total returns over time.

Read more »

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.
Dividend Stocks

How to Turn Your TFSA Into a Gold Mine Starting With Only $10,000

It doesn't have to be complicated or scary. You can turn any portfolio into a major gold mine.

Read more »