Income Investors: 2 Depressed Stocks for You

Long-term conservative investors looking for income and value should consider Enbridge Inc. (TSX:ENB)(NYSE:ENB) and another stock today.

| More on:
The Motley Fool
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 moresdf

The cheaper the share price of a stock, the higher the yield and income you’ll get. Here are two depressed stocks with strong dividends and upside potential that you should know about.

A safe 6.2% yield

You might not know Plaza Retail REIT (TSX:PLZ.UN), but you’ll know its biggest tenant, Shoppers Drug Mart, which was acquired by Loblaw in 2014.

Shoppers contributes 25.9% of Plaza Retail’s base rent revenue. Its other large tenants include KFC and Dollarama, which contribute 8.5% and 5%, respectively, of its base rent revenue. Its other tenants contribute 3.6% or less to its base rent revenue.

The retail REIT stocks haven’t been faring well this year because of the scare from online retail. However, Plaza Retail should do better than its bigger peers and has shown commitment to growing its distribution.

It has started paying a distribution in 2002 and has increased it every year since then. With an adjusted funds from operations payout ratio of 81% in the first three quarters and an average lease term to maturity of 5.9 years, Plaza’s yield is safe.

At the recent quotation of $4.34 per unit, the stock yields 6.2% and trades at an uncommonly cheap multiple of 12.5. If it trades at a fair multiple of 15, we could see upside of nearly 21% from the stock. So, the stock is a worthy candidate for income and total returns for conservative investors.

sit back and collect dividends

A safe 5.5% yield with a growing dividend

Income investors should also check out Enbridge Inc. (TSX:ENB)(NYSE:ENB). At $44 per share, the stock offers a safe 5.5% yield. Its payout ratio is expected to be about 62-68% of cash flow this year. And the company will likely continue growing its dividend at a nice pace.

It’s true that Enbridge shares have been dragged down for multiple reasons, including risks in its projects, dilution that occurred from its recent, big acquisition, and higher interest rates. However, the depressed shares are exactly what makes today an attractive entry point to buy Enbridge for long-term investors.

After Enbridge absorbs the Spectra Energy Corp. acquisition, it could trade above $60 per share again, which represents upside potential of at least 36%!

Investor takeaway

In value investing, investors try to buy stocks when they’re cheap. The depressed shares of Plaza Retail and Enbridge should attract conservative investors looking for safe income and upside potential in the long run. As the companies show they have the ability to grow their dividends, the shares will eventually be bid up again.

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 Kay Ng owns shares of Enbridge. The Motley Fool owns shares of Enbridge. Enbridge is a recommendation of Stock Advisor Canada.

More on Dividend Stocks

growing plant shoots on stacked coins
Dividend Stocks

5 Dividend Stocks to Buy With Yields Upwards of 5%

These five companies all earn tonnes of cash flow, making them some of the best long-term dividend stocks you can…

Read more »

funds, money, nest egg
Dividend Stocks

TFSA Investors: 3 Stocks to Start Building an Influx of Passive Income

A TFSA is the ideal registered account for passive income, as it doesn't weigh down your tax bill, and any…

Read more »

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

3 of the Safest Dividend Stocks in Canada

Royal Bank of Canada stock is one of the safest TSX dividend stocks to buy. So is CT REIT and…

Read more »

Growing plant shoots on coins
Dividend Stocks

1 of the Top Canadian Growth Stocks to Buy in February 2023

Many top Canadian growth stocks represent strong underlying businesses, healthy financials, and organic growth opportunities.

Read more »

stock research, analyze data
Dividend Stocks

Wherever the Market Goes, I’m Buying These 3 TSX Stocks

Here are three TSX stocks that could outperform irrespective of the market direction.

Read more »

woman data analyze
Dividend Stocks

1 Oversold Dividend Stock (Yielding 6.5%) to Buy This Month

Here's why SmartCentres REIT (TSX:SRU.UN) is one top dividend stock that long-term investors should consider in this current market.

Read more »

IMAGE OF A NOTEBOOK WITH TFSA WRITTEN ON IT
Dividend Stocks

Better TFSA Buy: Enbridge Stock or Bank of Nova Scotia

Enbridge and Bank of Nova Scotia offer high yields for TFSA investors seeking passive income. Is one stock now undervalued?

Read more »

Golden crown on a red velvet background
Dividend Stocks

2 Top Stocks Just Became Canadian Dividend Aristocrats

These two top Canadian Dividend Aristocrats stocks are reliable companies with impressive long-term growth potential.

Read more »