3 Dividend Stocks for Income Seekers

Dividend-paying stocks could fall as markets decline, but momentum and speculative investments will fare worse.

| More on:
The Motley Fool

Investors are getting more skittish with the markets. Risk avoidance is rising, which is why dividend-paying stocks in the telecom and banking sectors are holding up. Momentum plays, notably in technology and pharmaceutical, are falling. Negative news will rise as markets continue to drop, but the best way to navigate through the noise is to focus on favorable company-specific events.

1. Embridge

In the natural gas distribution market, Enbridge Inc. (TSX: ENB)(NYSE: ENB) received approval from the Ontario Energy Board (“OEB”) to increase rates by a whopping 40%. The OEB also approved the rate increase application from Union Gas Ltd. The increase will hit Enbridge customers next winter. Enbridge will not see a profit from the increases, since it is not allowed to. It may only earn a profit at a rate that the OEB approves. Still, the rate increase should help offset rising costs for Enbridge.

For the year ended December 2014, analysts expect Enbridge to earn $1.94 per share on average, and $2.28 per share in 2015. This gives Enbridge a forward P/E of 21.9. With an annualized dividend of $1.40, shares yield 2.78%.

2. Telus

In the telecom sector, Telus Corp. (TSX: T)(NYSE: TU) announced it will move Public Mobile users between May and mid-August. This will cut the cost of servicing the 2G network which supports 260,000 customers. At a quarterly rate of $0.36 per share, Telus yields 3.57%. The estimated date for Telus reporting quarterly results is May 8, 2014. The consensus estimate is earnings of $2.34 per share this year, and $2.61 per share next year.

3. Bank of Montreal

In the financial sector, Bank of Montreal (TSX: BMO)(NYSE: BMO) cut its fixed five-year mortgage rate to 2.99%. The move follows Toronto-Dominion Bank lowering its four-year fixed rate to 2.97%. The Bank of Nova Scotia now offers a four-year mortgage at 2.94%.

The new Finance Minister, Joe Oliver, said the government was watching consumer indebtedness. He observed BMO’s mortgage rate decrease was in response to the drop in bond yields. He did not imply that the government will prevent the Canadian banks from offering low lending rates.

To bolster demand for its mutual funds, the bank announced a new line of discount mutual funds. These funds will be managed mutual funds whose expense ratio will be lower.

Analysts have an average earnings estimate in BMO of $6.42 per share for 2014, and $6.84 per share in 2015. This gives the bank a current P/E of 11.45.

Foolish bottom line

Dividend-paying stocks could fall as markets decline, but momentum and speculative investments will fare worse. Investors will have the luxury of being rewarded a quarterly dividend while riding out the volatility in the markets.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Chris Lau does not own shares in any company mentioned.

More on Investing

Nuclear power station cooling tower
Metals and Mining Stocks

If You’d Invested $1,000 in Cameco Stock 5 Years Ago, This Is How Much You’d Have Now

Cameco (TSX:CCO) stock still looks undervalued, despite a 258% rally. Can the uranium miner deliver more capital gains to shareholders?

Read more »

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Dividend Stocks

TFSA Magic: Earn Enormous Passive Income That the CRA Can’t Touch

If you're seeking out passive income, with zero taxes involved, then get on board with a TFSA and this portfolio…

Read more »

Man with no money. Businessman holding empty wallet
Dividend Stocks

2 Stocks Under $50 New Investors Can Confidently Buy

There are some great stocks under $50 that every investor needs to know about. Here’s a look at two great…

Read more »

potted green plant grows up in arrow shape
Stocks for Beginners

3 Growth Stocks I’m Buying in April

These three growth stocks are up in the last year, and that is likely to continue on as we keep…

Read more »

clock time
Tech Stocks

Long-Term Investing: 3 Top Canadian Stocks You Can Buy for Under $20 a Share

These three under-$20 stocks offer excellent buying opportunities for long-term investors.

Read more »

Arrowings ascending on a chalkboard
Energy Stocks

Beat the TSX With This Cash-Gushing Dividend Stock

Canadian Natural Resources stock is well set up to beat the TSX as it continues to generate strong cash flows…

Read more »

think thought consider
Dividend Stocks

Down 10.88%: Is ATD Stock a Good Buy After Earnings?

Alimentation Couche-Tard (TSX:ATD) stock might not be the easy buy-case it once was. Here’s a look at what happened.

Read more »

money cash dividends
Dividend Stocks

TFSA Dividend Stocks: Earn $1,200/Year Tax-Free

Canadian stocks like Fortis are a must-have in your portfolio to earn tax-free yields for decades.

Read more »