This is a guest post by Harvi on Hashtag Investing
Dividend investing is a great way to ensure that you are creating passive wealth in both the bull and bear markets. Dividend stocks are companies that distribute part of their profits to their shareholders. Dividend investments are preferred by many investors as they have the benefit of passive income plus long-term capital gains as the value of the stock increases over time.
Investors with a low risk appetite typically buy dividend stocks. Investors who want part of their portfolio in a “safe” area also choose to purchase a certain number of dividend stocks. However, as with any investment, one must be careful when investing in the right companies.
Here are 5 Canadian dividend stocks that are undervalued and are likely to cause long-term appreciation in stock price as well.
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Undervalued Canadian Dividend Stock # 1: AltaGas (ATGFF)
AltGas operates one of the largest regulated natural gas distribution companies in the United States and has integrated midstream operations in Canada. Around 79% of midstream business EBITDA for 2021 will come from interest rate utilities and accept or pay contracts. Around 70% of the utility segment is protected by fixed distribution fees. Around 70% of the unprotected income comes from private customers.
AltaGas raised its guidance for 2021 after the numbers for the first quarter of 2021 exceeded estimates. EBITDA for the first quarter was $ 674 million compared to $ 499 million in Q1 2020, an increase of 35% year over year and reflecting solid performance across all platforms.
The new EBITDA forecast for 2021 is $ 1.475 billion – $ 1.525 billion. This is comparable to the previous range of $ 1.4 billion to $ 1.50 billion, and the new projections reflect growth of about 15% year over year using the midpoint. AltaGas has a dividend yield of 4.47%. It fits in perfectly with the undervalued dividend list.
Undervalued Canadian Dividend Stock # 2: Enbridge Inc. (ENB)
This medium-sized energy company has one of the largest moats in business. It is Canada’s largest natural gas distribution provider, carrying approximately 25% of the oil in Canada and 20% of the natural gas in the US. It has 22 wind farms and several other renewable energy systems. His clients include companies such as Imperial Oil, BP and NextEra.
A breakdown of Enbridge’s 2020 performance is shown in the image below:
Source: Investor Presentation
The amount of capital needed to build and maintain pipelines is in the billions, and the regulations in this sector are a minefield. Enbridge will spend $ 16 billion on expansion projects through 2023.
Enbridge is currently trading at $ 47.41, 10% less than its target price of $ 51.83, according to the consensus of analysts. It has a dividend yield of 7.04%, which makes Enbridge an attractive high-dividend stock.
Enbridge has increased its dividend for 26 straight years. The company will announce its results for the first quarter of 2021 on May 6th. This is a great opportunity to add the stock to your portfolio.
Undervalued Canadian Dividend Stock # 3: TELUS Corporation (TU)
Telus is one of the largest telecommunications companies in Canada. Telus has over 16 million subscribers, of which 9 million are cell phone subscribers. Around 900,000 subscribers were added in 2020. Despite the 2020 pandemic, the company posted revenue up 5.5% to $ 15.5 billion from $ 14.7 billion in 2019. It also increased its dividend payout by 5.2% to $ 1.18 each Share. Telus currently has a dividend yield of 4.8%.
The company’s big bet in 2021 is 5G, assuming the pandemic doesn’t throw everything back off balance. For 2021, Telus has forecast an 8 to 10% increase in sales, a 6 to 8% increase in EBITDA and a cash flow of $ 1.5 billion. With growth potential emerging in the second half of 2021 and a dividend yield of 5%, Telus can be expected to deliver solid returns to its investors.
Undervalued Canadian Dividend Stock # 4: Summit Industrial Income REIT (SMMCF)
Summit Industrial Income REIT is an open real estate investment trust focusing on light industrial real estate in Canada. Sure Dividend’s full REIT list can be found here.
Approximately 80% of its portfolio is in two regions: Ontario and Alberta. The share is very resilient. It traded at $ 12.70 in February 2020, just before the pandemic. It closed at $ 15.61 in April 2021. It has grown at a CAGR of 22.42% since May 1, 2017 when it traded at $ 6.95. The properties are single-story buildings and are located near major cities or transport hubs.
Revenue for 2020 increased 34.3% while net income increased 35.9%. The company acquired interests in 23 industrial properties, including the remaining 50% interest in 11 Montreal properties and two Guelph properties from joint venture partners, totaling 1.7 million square feet for $ 345.1 million. The company is expected to announce its results for the first quarter of 2021 on May 11th. It has a dividend yield of 3.46% and when you add the CAGR you can expect a total return of over 25%.
Undervalued Canadian Dividend Stock # 5: Algonquin Power and Utilities (AQN)
Algonquin Power and Utilities is a stable inventory and not too flashy. The stock price was up 41% from May 1, 2017 when it traded at $ 13.97 to $ 19.83 on April 30, 2021, a CAGR of 9.15%. This stock is a favorite of investors looking for steady growth as well as decent residual income from Algonquin. It has a dividend yield of 3.92%, which makes it a good haven in stormy waters.
There is a $ 9.4 billion investment plan running from 2021 to 2025, of which $ 3.1 billion will be used for renewable energy. For the past 10 years, it has increased its dividends at a CAGR of 10%. The stock has proven to be profitable in all seasons, and there is little reason to believe that this will change in 2021. She has a very good track record and should be a buy in a dividend portfolio.
The last snack
The ongoing pandemic has resulted in sell-offs in several sectors including REITs, energy and retail. This suggests that some of the stocks featured on this list are trading at attractive valuations and should see oversized profits starting in 2021, making them a solid bet for income, value and contrarian investors.
Another bullish scenario is that value stocks could finally outperform growth stocks in the near future. So these are stocks that you definitely want to have on your radar.
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