The S&P/TSX Composite Index has returned approximately 4.3% this month and is up 15% year-to-date. Hopes of a trade deal with the United States, along with fading concerns over the impact of tariffs on the Canadian economy, appear to have supported Canadian equity markets, lifting the benchmark index. However, the following two TSX dividend stocks have underperformed the broader equity markets and are trading at a discount of over 10% compared to their 52-week high. Given their high dividend yields, healthy growth prospects, and discounted stock prices, these two companies offer attractive buying opportunities.
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Canadian Natural Resources
Canadian Natural Resources (TSX: CNQ) operates a diversified asset portfolio, producing oil and natural gas across North America, the North Sea, and Offshore Africa. Amid falling oil prices, the Calgary-based energy company has been under pressure over the last few weeks, losing approximately 17% of its stock value from its 52-week high. The pullback has dragged its valuation down, with the company currently trading at 12.7 times analysts’ projected earnings for the next four quarters.
Moreover, CNQ operates a diversified and balanced asset base that requires lower capital reinvestment. Furthermore, its effective and efficient operations have reduced expenses, lowered the breakeven point, and improved profitability. Backed by strong financials and robust cash flows, the company has increased its dividend at a 21% CAGR (compound annual growth rate) over the past 25 years. Currently, it offers an attractive forward dividend yield of 5.4%.
Additionally, CNQ also has larger, high-quality reserves, with a total proven reserve life index of 32 years. With a planned capital investment of $6 billion for this year, the company continues to strengthen its production capabilities. Along with organic growth, the company also focuses on opportunistic acquisitions to drive its financials. Given these factors, I expect CNQ to sustain its dividend growth, making it an attractive long-term investment.
Pembina Pipeline
Second on my list is Pembina Pipeline (TSX: PPL), which operates a pipeline network transporting oil and natural gas across Western Canada. Additionally, the company owns natural gas gathering and processing facilities, as well as oil and NGL infrastructure and a logistics business. The Calgary-based energy infrastructure company has been under pressure over the last few months, losing around 15% of its stock value. Amid the pullback, its NTM (next 12 months) price-to-earnings multiple stands at a reasonable 17.4.
Moreover, Pembina operates a highly contracted business, generating around 84% of its EBITDA (earnings before interest, taxes, depreciation, and amortization) from take-or-pay and fee-for-service contracts. Therefore, its financials are less susceptible to market volatilities. Meanwhile, the company has grown its adjusted EBITDA per share at an annualized rate of 9% for the last 10 years, while raising its dividend at a 5% CAGR. It currently offers a quarterly dividend payout of $0.71/share, translating into a forward dividend yield of 5.5%.
Additionally, the company continues to expand its asset base to meet the growing production in the Western Canadian Sedimentary Basin. It has recently raised its capital investments guidance for this year from $1.1 billion to $1.3 billion. These investments could boost its financials in the coming quarters. Moreover, its financial position looks healthy with a liquidity of $2.1 billion. Considering all these factors, I believe Pembina would be an excellent long-term buy.
