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2 Value Stocks for Long-Term Dividend Investors

The recent pullback in the stock market is giving dividend investors a chance to buy some stable names at very reasonable prices.

Here are the reasons why I think Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM), and Telus Corporation (TSX:T)(NYSE:TU) offer good long-term value as well as reliable dividends.

Canadian Imperial Bank of Commerce

Canada’s fifth-largest bank is often passed over by investors who are looking for a financial company to put in their portfolios. Part of the reason is CIBC’s rocky history. During the Great Recession the bank had to write off more than $10 billion in bad bets on the U.S. subprime mortgage market, and that knocked about 60% off the share price.

Management then decided to focus on Canadian retail banking and has done a fantastic job of increasing profits and rebuilding the brand. But that success is now the source of new concern as analysts fret over the company’s Canadian mortgage exposure.

As of CIBC’s most recent earnings report, the company had $155 billion in Canadian residential mortgages on the books, which is a lot for a company with a market capitalization of just $37 billion. On the surface the numbers look a bit scary, but the quality of the portfolio is actually quite good.

Two-thirds of the mortgages are insured and the loan-to-value ratio on the rest is 61%. This means the Canadian housing market would really have to go off the rails in a big way for CIBC to get into serious trouble. The company is also very well capitalized, with a Basel III capital ratio of 10.8%.

One other thing investors should consider is the company’s focus on wealth management. Second-quarter adjusted net income from the unit rose from $121 million in 2014 to $134 million. CIBC’s new CEO, Victor Dodig, plans to expand this area of the business and that will help diversify earnings in coming years.

Total Q2 adjusted earnings came in at $2.28 per share, a 5% increase over the same period last year. Return on equity was a healthy 20.2%. Management recently increased the dividend payout to $4.36 per share, which yields about 4.6%. At the moment, CIBC is trading for just 10 times forward earnings.

CIBC is more than capable of riding out a downturn in the economy and concerns about a crash in the housing are probably overblown. At the current price, investors with a long-term outlook should be comfortable buying the stock.


Canada’s fastest-growing communications company is also the one that has the happiest customers. There’s probably a link between those two stats.

Telus continues to grow both its wireline and wireless subscriber bases. The company’s Telus TV and broadband Internet offerings are winning business from the cable competitors. At the same time, Telus continues to squeeze more money each quarter out of its lucrative smartphone clients.

In fact, Telus reported a Q1 blended average revenue per user of $62.34, which was the 18th consecutive year-over-year quarterly gain. Overall wireless revenues in Q1 increased by 6.4% compared with Q1 2014.

The company also has a little-known operation called Telus Health. This division provides online solutions to doctors, hospitals, insurance companies, and patients. Telus is already the market leader in this fast-growing segment, and investors should watch this division become more important in the overall revenue mix.

Telus pays a dividend of $1.68 per share that yields about 4%. The company regularly increases the payout and that trend should continue.

The stock currently trades at a reasonable 15 times forward earnings. As a long-term holding, this should be rock-solid bet that investors can simply buy and forget about for 20 years.

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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 has no position in any stocks mentioned.

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