2 Dirt-Cheap Dividend Shares I’d Buy for Long-Term Passive Income

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Discounted dividend stocks are attractive, thanks to the high yield. But if you can buy dividend stocks that are both discounted and undervalued, you may also benefit from their eventual recovery. You can further fine-tune your choices for dividend stocks you can hold long term and start a passive income you can rely upon for years. Multiple stocks check all these boxes, and two of them stand out from the rest.

A bank stock

Canadian Western Bank (TSX:CWB) is different from the Big Six bank stocks that most investors flock to, but there is one trait it shares with its larger peers: healthy dividends. The bank has been growing its payouts for over three decades, making it one of the oldest Dividend Aristocrats in Canada.

The yield is usually not attractive, but since the stock is heavily discounted right now, the yield has grown to a decent level. The 41% discount has pushed the yield up by over 5.2%. The price-to-earnings ratio has also become attractive and is currently at seven, making it more undervalued than the Big Six banks.

The bank also has a great history regarding the payout ratio. In the last decade, the payout ratio has remained below 44% and is currently 36.4%. It’s also not a completely lost cause from a capital-appreciation perspective. Even though it doesn’t grow similarly to the Big Six banks (consistently), the cyclical growth can be pretty decent when the market conditions are right.


PRO REIT (TSX:PRV.UN) is a small-cap real estate investment trust (REIT) that’s currently discounted and undervalued. It’s trading at a 20% discount from its last peak (24% from the pre-pandemic peak), and the price-to-earnings ratio is at 4.3 right now. Even though it’s pretty modest, the slump has pushed the dividend yield up to an attractive level of 7.6%.

The REIT has been around for over a decade, and even though the stock suffered a significant decline in its early years, it has been relatively stable since 2014. This stability is one factor that makes it a healthy long-term holding. The dividend history of this REIT doesn’t endorse its selection as a long-term dividend holding, since the REIT slashed its payouts in 2020.

But it was a pragmatic decision. It allowed the REIT to afford its dividends better; consequently, the payout ratio has reached a very healthy level (31.4% right now).

Since the REIT has already slashed its payouts, there is a decent probability that it may not do so again in the near future, and if the REIT starts growing its dividends to reach the former level, you may enjoy a significant increase in the dividend income.

Foolish takeaway

Long-term and sustainable passive income can be an essential element of your retirement planning. The more you can rely upon your dividend income to augment/supplement your pensions, the less you will have to rely upon your savings or retrieving capital invested in these or other companies/assets.   

The post 2 Dirt-Cheap Dividend Shares I’d Buy for Long-Term Passive Income appeared first on The Motley Fool Canada.

Free Dividend Stock Pick: 7.9% Yield and Monthly Payments

Canada’s inflation rate has skyrocketed to 6.9%, meaning you’re effectively losing money by investing in a GIC, or worse, leaving your money in a so-called “high interest” savings account.

That’s why we’re alerting investors to a high-yield Canadian dividend stock that looks ridiculously cheap right now. Not only does it yield a whopping 7.9%, but it pays monthly!

Here’s the best part: We’re giving this dividend pick away for FREE today.

Claim your free dividend stock pick
* Percentages as of 11/29/22

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Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends Canadian Western Bank. The Motley Fool has a disclosure policy.

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