2 choices of premium dividend stocks for new investors
Canadian investors have a great selection of attractive stocks to choose from as we come out of one of the toughest months of the year. Without a doubt, calls for a market correction (or even a bear market!) Such calls, as I have noted in many previous articles, should be taken with a little grain of salt.
Not only is it virtually impossible to predict a market fall, it is also unfair to group all stocks, even those that have already suffered a massive blow to the chin, as being overvalued or lagging behind in correction. Not all names need to be corrected as the larger markets are pouring out. Of course, they can always follow in the footsteps of falling markets as fear and panic trumps everything else, including fundamentals and valuation.
Ultimately, you should be a buyer of securities on your radar that are priced below a level you feel is right. Calls for a market correction should be noted, but they should not be taken as gospel, even if a big league institution like Morgan Stanley supports such a call.
Without further ado, let’s consider the following two Canadian stocks that look tempting as October approaches:
CP Rail (TSX: CP) (NYSE: CP) won the big Kansas City South bidding war against CN Rail. But his title came off losing, and I think he could continue to do so in the short and medium term. The price of the KSU-CP tie-up is going to hurt, and it will be difficult to look past next year’s catalysts.
As the stock slumps, I think newbie Canadian investors should consider buying stocks gradually lower. While the KSU deal is a “deal breaker” for many Canadians who hate questionable acquisitions in an era of broader overvaluation, I still believe that most, if not all, of the pressures associated with KSU-CP have been taken into account in the actions. From top to bottom, CP stock has plunged about 17%. While the name has started to pick up, I’m not sure it can support a rally, given the integration risks the deal brings and fears the economy could go from hot to hot or white. hot.
Either way, CP is a dividend aristocrat with endurance. At 17.5 times earnings, CP is a relative bargain. If it gets cheaper, be prepared to buy even more of a name that will take at least three years to prove the KSU deal is a “winner” from a value creation standpoint.
AEC (TSX: BCE) (NYSE: BCE) is not my favorite dividend-paying stock due to its lack of growth relative to its peers. Yet he has one of the most abundant payouts on the TSX. The dividend is currently paying 5.5% after the stock slipped just north of 4% from its 52-week (and historic) high. If you’re looking for passive income and don’t mind the potential for mediocre capital appreciation, I think you need to buy the stock after its recent ‘half-correction’. The dividend is on solid ground and will likely continue to grow at an above average rate as the company holds its place in a deeply profitable Canadian triopoly.
Indeed, BCE and the Big Three are obtaining lasting competitive advantages that their US counterparts do not. There isn’t as much competition in the North, and for that reason Canadian telecommunications are great long-term purchases.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We are straight! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer, so we post sometimes articles that may not conform to recommendations, rankings or other content. .
Foolish contributor Joey Frenette has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.