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

A worker uses a double monitor computer screen in an office.
Dividend Stocks

2 of the Best Canadian Stocks That Pay Out Monthly

These two Canadian dividend stocks are some of the best to buy, offering yields upwards of 5.4% and returning cash…

Read more »

Oil pumps against sunset
Energy Stocks

Suncor Stock: How Low Could it Go in 2023?

Suncor (TSX:SU) is up on the back of a bounce in oil prices but remains out of favour. Can new…

Read more »

clock time
Dividend Stocks

How Investors Can Build a $1 Million Portfolio in 12 Years

If you can handle it, you can certainly create a million-dollar portfolio in just 12 years, especially considering this dividend…

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

Passive-Income Seekers: 4 Safe Dividend Stocks to Own Beyond 2033

Dividend stocks are great, but only if they continue to perform after downturns as well. In the case of these…

Read more »

stock analysis
Tech Stocks

Investing in AI: 1 Cheap Tech Stock Poised for Growth

Docebo is a little-known Canadian tech firm that's unlocking the power of next-generation AI technologies.

Read more »

A close up image of Canadian $20 Dollar bills
Dividend Stocks

4 Big Dividend-Paying Stocks for 2023

These four stocks all earn strong cash flow and offer attractive dividend yields, making them some of the best to…

Read more »

A airplane sits on a runway.

1 Growth Stock Down 40% to Buy Right Now

This Canadian stock has years of growth potential, and considering the significant discount it trades at now, it's a top…

Read more »

grow dividends
Dividend Stocks

This 7.5 Percent Dividend Stock Pays Cash Every Month

If you need cash now, this dividend stock is certainly one I would consider that could double in share price…

Read more »