There is a ton of hype in the media about which stocks are going to fall or rise in the wake of the surprise U.S. election results.
It makes for interesting reading, but investors need to keep their heads.
Why?
Stocks might be volatile in the short run, but the Trump win will have little or no long-term impact on the broader equity market, and Canadian investors should pretty much ignore any immediate negative effects the outcome might have on their portfolios.
In fact, any pullback in top-quality dividend names should be seen as an opportunity to add to positions or start new ones.
Let’s take a look at BCE Inc. (TSX:BCE)(NYSE:BCE) and Toronto-Dominion Bank (TSX:TD)(NYSE:TD) to see why they remain attractive picks today.
BCE
BCE is a dominant force in the Canadian communications market and continues to expand its reach.
The company recently bought out is partners in Q9 Networks and is in the process of acquiring Manitoba Telecom Services.
BCE has also made a strong push into the media space, adding a television network, specialty channels, sports teams, radio stations, and an advertising business.
Retail operations round out the portfolio.
When you combine these assets with the world-class wireless and wireline network infrastructure, you get a very powerful business that connects with most Canadians at some level on a weekly, if not daily, basis.
In fact, any time a Canadian sends a text, downloads a movie, checks e-mail, listens to the weather report, or watches the news, the odds are pretty good that BCE is involved somewhere along the line.
The company just reported solid Q3 2016 results and has a steady track record of raising its dividend in step with growth in free cash flow.
The current payout provides a yield of 4.6%.
The election itself has probably helped boost viewership and data usage across the company’s different platforms, but the result will have no impact on BCE’s long-term business outlook.
TD
The American banking sector is a hot topic for U.S. politicians, and pundits are quick to dole out their views on how a Trump win will impact the industry.
One way to gauge the level of concern among the banks is to look at TD’s latest investment.
The company, along with its U.S. partnership TD Ameritrade, just announced a deal to spend US$4 billion to buy Scottrade Financial. TD’s U.S. banking unit will take the Scottrade banking operations, and TD Ameritrade will get the brokerage business.
If TD’s management team was worried about the outcome of the election, they probably wouldn’t have done the deal, so investors should generally ignore most of the noise in the media targeted at how the election will impact the banking sector.
TD continues to deliver solid results, and the growing U.S. retail operations provide a nice hedge against weakness in the Canadian economy. In fact, TD is now one of the top 10 banks in the United States and has more branches south of the border than it does in Canada.
The stock’s dividend has a compound annual growth rate of 12% per year over the past two decades, and investors should see steady hikes continue. The company is targeting earnings-per-share growth of at least 7% per year in the medium term, which is pretty good in a weak economic environment and demonstrates the strength of the company’s overall business.
The current distribution yields 3.7%.
Is one a better bet today?
Both stocks are top-quality, long-term picks for any dividend investor. If you simply want the best yield, go with BCE. If you think exposure to the U.S. market is important, TD is a great pick.
