Value investing can literally pay dividends.
As a stock depreciates, the dividend yield swells by a proportional amount. Add dividend raises into the equation, and you could be looking at a high-yield dividend-growth play that could allow investors to lock in a massive yield alongside potential capital gains in the event of a rebound.
Here are three dipped and distressed dividend stocks you may want to bag if you’re looking for a bargain.
Enbridge (TSX:ENB)(NYSE:ENB) is the largest energy pipeline firm in Canada, and its stock has been hurting for well over four years now courtesy of the 2014 plunge in oil prices, which acted as a dark cloud over the entire energy sector, energy transporters included.
Unfavourable industry conditions have caused the stock to pull back nearly 40% from peak to trough. Still, despite the pressures, management has continued to live up to its promise to investors by continuing to hike its dividend at a 10% annualized rate.
In recent months, the stock has begun to pick up traction, with the stock up over 20% on the year thanks in part to some “sweet results” that fellow Fool Kay Ng covered in a prior piece. The dividend currently yields 5.75% and looks to be well supported by cash flows that are slated to continue growing.
With a 10% dividend hike on the horizon and the Line 3 Replacement catalyst to look forward to over the next few years, there’s never been a better time to get into the battered pipeline play.
Sticking with the pipeline theme, we have Inter Pipeline (TSX:IPL) — a stock that’s down over 45% from its 2014 all-time high. The stock sports a juicy 7.92% dividend yield, the main attraction to income investors who don’t mind a bit of pain with the hopes of long-term gain.
Inter Pipeline is progressing with its $3.5 billion Heartland Petrochemical Complex, which is slated to come online by the conclusion of 2021 and will act as a source of relief for a company that’s been under a considerable amount of industry-wide pressure.
The dividend yield is massive, but it looks safe and ripe for growth as the company’s new cash flow-generative projects slowly but surely come online.
At the time of writing, the stock trades at just under 10 times cash flow and 2.2 times book. While the name may not give you quick riches overnight, it will enrich you with income until investors better appreciate the company that’s far more robust than the Street’s been giving it credit for.
Pipelines are a great way to lock in larger yields with double-digit annualized growth potential. Both names are dirt cheap and are looking for ways to get back up on the podium, so if you’ve got a long-term time horizon and desire significant income in the meantime, look no further than Enbridge and Inter Pipeline.
Stay hungry. Stay Foolish.
Fool contributor Joey Frenette has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Enbridge.
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