3 Struggling Dividend Stocks Poised to Recover

Here are three quality companies that, for whatever reason, have underperformed the market. Now is a good entry point for all of them.

| More on:
The Motley Fool

These days, with the overall stock market trading at close to all-time highs, it’s difficult for investors to find any sort of decent value. There are plenty of stocks that have performed well, and plenty of good, rock-solid companies that are trading at an okay valuation, but there aren’t many stocks that have struggled to keep up with the rally that don’t have major warts.

This is one of the pitfalls of investing during one of the longest bull markets in history. When most everything goes up, nothing is cheap. Investors are left to try to find value among the scraps that the market forgot, or push their definition of “fairly valued” just a little higher in order to find quality companies to buy.

Fortunately for investors looking for a little value, there are some decently priced options out there. They’re few and far between, but they exist if you just look hard enough. Here are three that investors should consider buying.

1. National Bank

Investors don’t give National Bank (TSX: NA) nearly the love that they give Canada’s five other largest banks, which gives you an opportunity to buy a quality company at a cheaper price than its competitors.

National Bank is a huge financial institution, with a market cap higher than $15 billion and just about $200 billion in assets. The majority of its business comes from Quebec, but it operates across the country. It is Canada’s sixth-largest bank.

It’s also a cheap stock. It trades at less than twice book value; compare that to its competitors, which all trade at close to 2.5 times book value. It also has a P/E ratio of under 11, which is a full 20% less than the average of its peers. Also, National’s dividend is even more generous, yielding 4.2%.

The knock on the company is that it doesn’t have any significant business outside of Canada. Don’t be surprised if it bites the bullet and buys a small American bank in the next few years. When it does, that should help it bridge some of the gap between it and its peers.

2. Bombardier

It’s tough to be a Bombardier (TSX: BBD.B) shareholder.

The company is all in on its new CSeries line of business jets, which has suffered all sorts of delays and issues. Delivery to customers is supposed to start in the second half of 2015, but investors don’t have much confidence that’ll actually happen. Because of these delays, the stock has shed 20% of its value over the last year.

Which is exactly why investors should buy now. CSeries customers are still on board, and not one has cancelled their order. Once the company starts getting revenue from the new planes, it should have enough demand to keep the jet division busy for years. The market is discounting this growth because it’s not sure when it’s going to happen, but there’s little evidence that it won’t.

In the meantime, investors get a rail business that’s profitable, has a nice sized backlog, and is the leader in North America. The rail business itself is world class. Plus, investors are getting in at close to 52-week lows and are getting paid a 2.7% dividend to wait.

3. Rogers Communications

Over the last year, the TSX Composite has surged, rising just less than 25%. In the same time period, shares in Rogers Communications (TSX: RCI.B)(NYSE: RCI) have actually fallen, shedding more than 7% of their value. This represents a great entry point for long-term investors.

The company’s missteps haven’t been bad enough to justify its price decline. Sure, wireless growth has struggled, but Rogers is still Canada’s wireless leader. It also paid too much — at least, according to analysts — for its latest purchase of spectrum, but the frequencies purchased will improve customer reception inside buildings and in subways, exactly where everyone demands better coverage.

The company is being proactive in fixing some of its issues. It has replaced several members of senior management, and is working on improving its front-line customer service. While investors wait for it to recover, they’ll enjoy a 4.4% dividend that has grown every year since 2004.

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 Nelson Smith has no position in any stock mentioned in this article.

More on Investing

Business man on stock market financial trade indicator background.
Tech Stocks

1 Growth Stock Down 50 Percent to Buy Right Now

There are plenty of growth stocks in the market worth considering, but Shopify (TSX:SHOP) looks like one of the best…

Read more »

You Should Know This
Dividend Stocks

How to Convert a $300 Monthly Investment Into $338 in Monthly Income

If you want a certain amount in monthly passive income, invest a similar amount today and leave the rest to…

Read more »

Increasing yield
Dividend Stocks

3 Income Stocks With Big Yields to Consider in April 2024

If you haven’t yet made your March investments, here are three income stocks to buy the dip and lock in…

Read more »

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Dividend Stocks

RRSP Investors: Don’t Miss Out on This Contribution Hack!

This hack has so many benefits for you -- not just when you put it in your RRSP but for…

Read more »

edit Sale sign, value, discount
Stocks for Beginners

These 3 Growth Stocks Are on Sale and Set to Surge

Some growth stocks are on sale right now that offer massive long-term potential for investors. Here's a trio to consider…

Read more »

Cannabis grows at a commercial farm.
Cannabis Stocks

Why Canopy Growth Stock Could Double in 2024

Canopy Growth (TSX:WEED) stock saw its share more than double in the last two weeks. So, can it do it…

Read more »

Young woman sat at laptop by a window
Dividend Stocks

3 Dividend Stocks Everyone Should Own for the Long Haul

For investors looking for top-tier dividend stocks to buy and hold for the long term, here are three of my…

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

Passive Income: 2 Safe Dividend Stocks to Own for the Next 10 Years

Dividend stocks such as Manulife and Fortis can help you generate a stable and recurring passive-income stream.

Read more »