The S&P/TSX Composite Index has seen a spectacular rally in the last few months as declining interest rates and a better-than-expected economic outlook continue to boost investors’ sentiments. Despite the broader market rally, many fundamentally strong dividend-paying stocks still look cheap and too attractive to ignore. This is one of the key reasons why this could be the right time for long-term investors to seize on these undervalued opportunities.
In this article, I’ll highlight two such absurdly cheap stocks that long-term investors may want to consider right now, even with a modest $500 investment.
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Magna International stock
Even as the TSX benchmark has risen sharply so far in 2024, shares of Magna International (TSX: MG) have seen over 25% value erosion year to date. With this, this Aurora-headquartered auto parts and mobility technology company currently has a market cap of $16.8 billion as its stock trades at $58.35 per share. The recent decline in its share price, however, has led to an increase in its annualized dividend yield, which currently stands at 4.5%.
This decline in Magna stock could mainly be attributed to the recent weakness in its financial growth trends due mainly to a slowdown in the global economy, which has affected vehicle production. Although in the first half of 2024, the company’s total revenue rose 1.3% YoY (year over year) to US$21.9 billion, its adjusted earnings slipped by nearly 7% to US$2.43 per share. Notably, Magna faced higher costs linked to warranty expenses and restructuring initiatives in recent quarters, which affected its earnings.
Despite temporary challenges, Magna continues to reward its investors with a stable payout, as it paid US$134 million in dividends in the latest quarter alone. Moreover, the company’s long-term growth outlook remains strong with its continued focus on innovative solutions for the automotive industry, especially on electric and autonomous vehicle solutions. These factors make Magna stock look really attractive to buy on the dip right now.
Maple Leaf Foods stock
Just like Magna, Maple Leaf Foods (TSX: MFI) stock has also seen downward movement of late, diving by 15% year to date. This Mississauga-based meat processing company currently has a market cap of $2.7 billion as its stock trades at $21.54 per share. At this market price, it offers a 4.1% annualized dividend yield and distributes these payouts every quarter.
In the six months ended in June 2024, Maple Leaf’s revenue declined by 1.2% YoY to $2.4 billion as it faced softer demand in certain key segments, especially in plant protein and poultry. Despite this drop in its revenue, the company’s profitability is continuing to improve this year with the help of favourable pork market conditions and its cost-cutting measures. As a result, Maple Leaf posted a strong adjusted net profit of $27.1 million for the first half, far better compared to its adjusted net loss of around $14 million.
To unleash the potential of its business, Maple Leaf plans to spin off its pork business into a separate, publicly traded company by 2025. This strategic move is expected to create two focused business entities and allow Maple Leaf to concentrate on its core protein brands while giving the pork segment the independence to pursue its own growth strategy. Considering these proactive strategic initiatives, MFI stock could be an attractive choice for long-term investors who want to add some cheap dividend stocks to their portfolios.
