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Investing in undervalued dividend stocks can be a strategy to secure attractive dividend yields and potential long-term capital gains. Here are two cheap TSX dividend stocks to consider for 2024:
1. Magna International (TSX:MG):
- Market Cap: $22 billion
- Dividend Yield: 3.2%
- Performance: Down 38% from all-time highs
- Q3 2023 Revenue: US$10.7 billion (15% YoY increase)
- Q3 2023 Adjusted EBIT: US$615 million (YoY increase)
- Operating Cash Flows: US$797 million
- Valuation: Priced at 8.7 times forward earnings, a 22% discount to consensus price target estimates.
- Dividend History: Magna International has raised dividends by 12% annually over the last 16 years.
Magna International is a major auto-ancillary manufacturer, supplying systems and components to major OEMs globally. Despite challenges in the auto industry, the company demonstrated operational efficiencies and cost initiatives, leading to strong financial performance. With a dividend yield of 3.2% and a history of annual dividend increases, Magna International presents an attractive option for dividend-focused investors.
2. Newmont (TSX:NGT):
- Market Cap: $65 billion
- Dividend Yield: 3.9%
- Acquisition: Completed acquisition of Newcrest Mining, creating the world's largest gold company with significant copper production.
- Synergies: Expects annual pre-tax synergies of US$500 million within the next two years.
- Production: Expects to produce 5.3 million ounces of gold in 2023.
- Q3 2023 Performance: Produced 1.3 million ounces of gold, 10,000 tonnes of copper, generated US$933 million in adjusted EBITDA.
- Financial Position: Ended Q3 with US$3.2 billion in cash and a net-debt-to-adjusted EBITDA ratio of 0.7 times.
- Valuation: Priced at 15 times forward earnings, trading at a 71% discount to consensus price target estimates.
- Dividend History: Newmont has paid over US$5 billion to shareholders since 2019, with almost 35% annual dividend increases in the last seven years.
Newmont, a leading gold mining company, has strengthened its position through strategic acquisitions, creating a substantial portfolio of assets. The company's focus on synergies, exploration opportunities, and strong financials make it an appealing choice for long-term investors seeking exposure to the precious metals sector. With a dividend yield of 3.9% and potential for profit margin expansion with higher gold prices, Newmont stands out as a compelling investment option.
In summary, both Magna International and Newmont offer dividend income and growth potential for investors looking to build a long-term, income-generating portfolio in 2024.
