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Income Investors: These Oversold Titans Yield Nearly 5%

It’s not often that investors get a chance to buy blue-chip dividend stocks at a discount, but the opportunity is presenting itself right now in a few of Canada’s best companies.

Here are the reasons why I think income seekers should consider BCE Inc. (TSX:BCE)(NYSE:BCE) and Potash Corp./Saskatchewan Inc. (TSX:POT)(NYSE:POT) right now.

BCE

Canada’s largest communications company is doing a lot of things right these days, but the stock has been on the slide for nearly three months.

Most of the concern revolves around recent decisions made by the CRTC. This summer any customer on a three-year wireless contract will be free to walk away without penalty. In order to ensure customers don’t go shopping, BCE and its competitors are offering their clients juicy incentives to sign up on a new plan before the expiry date.

These efforts are going to put a small dent in margins in the short term, but investors shouldn’t worry too much about it. BCE has been doing well in the wireless space.

In fact, wireless operating revenues in the first quarter were 9.7% higher than the same period in 2014, and wireless data revenues jumped 24.4%.

Another concern revolves around TV subscriptions. Next March all cable and satellite customers will have the option to take a $25 package and then pick and pay for the additional channels.

Content owners like BCE are not very happy because they rely on the expensive packages to cover the costs of producing all the programs. They might also have a tough time selling advertising if they can’t guarantee the number of potential viewers.

I think the concerns around this issue are overblown. Some channels and shows will certainly be in trouble, but the popular content might actually bring in more money. BCE owns some of the top media assets and specialty channels in the country.

BCE just reported strong Q1 2015 earnings. Expected free cash flow growth in 2015 is 8-15%. The company pays a dividend of $2.60 per share that yields 4.9%.

Potash Corp.

Shares of Potash Corp. are down nearly 16% in the past three months. Investors are nervous about new tax rules in Saskatchewan and a global market-share war among potash producers.

The Government of Saskatchewan’s new provincial budget includes tax changes that will have a negative impact on Potash Corp.’s pre-tax earnings by reducing the allowable deductions for capital expenditures.

Potash is completing $6 billion in expansion projects in Saskatchewan and says the new rules will impact 2015 earnings by $75-100 million. The impact is expected to be smaller moving forward.

It sounds like a lot of money, but Potash says the impact for 2015 will be about $0.07 per share. Full-year guidance is $1.75-2.05 per share.

Potash reported strong Q1 earnings of $0.44 per share, a 10% year-over-year gain. The numbers were weaker than expected and that has contributed to the slide in the stock price.

The company is seeing strong global potash demand and expects momentum to accelerate in offshore markets through the second quarter.

Investors should take a long-term view when evaluating the company. As the capital projects shift from development to production, free cash flow should increase substantially.

Potash pays a dividend of US$1.52 per share that yields about 4.7%.

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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 Andrew Walker owns shares of Potash Corp.

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