3 Canadian Dividend Stocks for Value Hunters

Are you a value hunter?

If so, you may be interested in picking up high quality value stocks that also pay dividends. Value- and dividend-based investing strategies tend to overlap, because most “value” sectors (banking, energy, utilities etc.) tend to pay dividends. That’s not to say that value investing and dividend investing are the same thing. Value investors focus on cheapness, dividend investors focus on income. But there’s a lot of overlap. With that in mind, here are three quality dividend stocks for value hunters to consider in May 2023.

Bank of Nova Scotia

The Bank of Nova Scotia (TSX:BNS) is a value stock trading at eight times earnings and only at a slight 7% premium to book value. It is also a high-dividend stock with a 6% yield. BNS is sometimes thought of as riskier than other Canadian banks. It has a large presence in Latin America, a region whose markets aren’t as well regulated as Canada’s are. Also, its growth over the last five years has been worse than that of Royal Bank and Bank of Montreal: it has only grown its revenue by a 3% CAGR and earnings by a 1.3% CAGR over that period.

Nevertheless, BNS stock has become so cheap that its dividend alone is enticing. For certain, 6% is higher than the yield you get on treasuries, even after all of the Bank of Canada’s many interest rate hikes. It might be worth it for an investor seeking consistent income, who isn’t too concerned about overall return.

Suncor Energy

Suncor Energy Inc (TSX:SU) is a Canadian energy stock with a P/E ratio of five and a 5% dividend yield. It is best known for its gas station chain, Petro Canada, which serves gasoline all over the country. It’s also involved in refining and exporting oil to the United States.

Suncor Energy did very well last year. It delivered large increases in revenue and earnings in all of its quarters. For example, in the fourth quarter, it did:

  • $4.2 billion in funds from operations, up 43%.
  • $3.9 billion in cash from operations, up 50%.
  • 689 million barrels of oil produced per day, up 3.6%.
  • $2.7 billion in net income, up 80%.

The quarter was pretty strong. Most likely, the growth in the first quarter wasn’t as good, because oil prices in Q1 2023 were lower than in Q1 2022. Nevertheless, Suncor managed to pay off a lot of debt last year, so the earnings could be better than expected.

Cenovus Energy

Cenovus Energy (TSX:CVE) is an oil company similar to Suncor Energy. Much like Suncor, it extracts and refines oil. It recently exited the gas station business after some investors convinced it that the business was holding it back. The integrated energy company is the kind of company that will do well as long as oil prices are pretty high. Cenovus is a disciplined, well-run company that paid off a large amount of debt last year with its windfall profits. So now, it’s in a position to profit again in 2023, even though oil prices aren’t as high as they were last year.

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