To establish a passive income stream at a low cost, income-seeking investors may want to consider including undervalued dividend stocks in their portfolio. The relationship between a company’s share price and its dividend yield is crucial, as investors should aim to identify quality stocks that are trading at a discount while offering an attractive yield.
Given that dividends are not guaranteed, it is essential to hold a portfolio of fundamentally strong stocks that are well-positioned to perform well across different market cycles.
Two Canadian dividend stocks with forward yields exceeding 6% in 2024 are worth considering. The first is a company with a market capitalization of $6 billion, that has shown significant returns to shareholders since its IPO in July 2010. Despite its strong performance, this company pays a forward yield of 7.1% and has a solid balance sheet to support its expansion plans.
The second company, valued at $22 billion, is a major player in the energy sector and pays an annual dividend with a forward yield of 2%, in addition to special dividends based on quarterly cash flows. This company has returned over 400% to shareholders in the last five years and is expected to generate significant free cash flow in the coming years, leading to potential dividend increases.
Both of these stocks are trading at a discount to consensus price targets and could offer attractive returns to investors looking to add income-generating assets to their portfolios.
