2 Top Dividend Stocks to Beat New U.S. Tariffs

To misquote Yoda from one of the less-than-stellar Star Wars’ movies: “Begun, the trade war has!” While making light of …

| More on:
The Motley Fool

To misquote Yoda from one of the less-than-stellar Star Wars’ movies: “Begun, the trade war has!”

While making light of the rise of American protectionism is a typical knee-jerk reaction of stock market observers, it’s important to recognize the U.S. initiation of an all-out trade war for what it is: a return to the pre-globalization economic Dark Ages.

The imposition of tariffs on Mexico, Canada, and Europe by the U.S. is one of the most serious events in the post-crisis global economy, and the TSX has dipped accordingly. But if you think it’s bad now, wait until the new tariffs start to hurt actual businesses, their shareholders, and the companies that rely on them.

New U.S. tariffs could be a contrarian’s dream come true

You can expect to see a sell-off in affected industries. Steel is an obvious one, and Canada is one of the top exporters of the metal to the U.S., itself the world’s number one steel importer. However, if you happen to be a contrarian investor, what the sell-off means is that you have a great opportunity to buy deeply discounted steel and aluminum stocks.

Far from becoming worthless, however, your shares in these metal commodities will eventually pick up again. There’s a finite amount of both metals in the ground, and while the outlook is rocky to say the least, demand will remain high. In fact, should the trade war spill over into actual war, you may well see your metal stock soar in value. Not something to look forward to in humanitarian terms, perhaps, but a metallic lining of a kind.

What can you do to stay safe and still support Canadian suppliers?

The classic contrarian move right now would be to find smart ways to buy steel and aluminum. While it’s up to you to do your own homework here, at least one metal producer on the TSX springs to mind.

Russel Metals Inc. (TSX:RUS) is big, bold, and beautiful. It does very little cross-border business and thrives on high steel prices. Far from being a stock to avoid on the backs of steel tariffs, Russel Metals may be a wise and rewarding buy in the midst of a materials shakeup. A 5.14% yield and a currently falling share price – down 1.22% to $29.21 a pop – make this a bold contrarian pick with the plenty of upside potential.

What else can you do to stay safe and still turn a profit? Hold onto your stock in Toronto-Dominion Bank (TSX:TD)(NYSE:TD), for one thing. It’s surging ahead on its expansion into the U.S. market, and this growth is likely to be buoyed rather than sunk by news of tariffs and other economic high jinx. Instead of selling, gamble on level-headed customers south of the border being likely to see a Canadian bank as more stable than an American one in the coming months and years.

On the subject of bank stocks, Europe is reporting a sell-off in financials as the Italian government furor threatens a full-blown Eurocrisis. In the event that this contagion spreads to North America, contrarian investors could use this as a chance to grab some discounted stock in the Big Six.

The bottom line

When taken in conjunction with the OPEC/Russia oil market manipulation and an Italy-led Eurocrisis, a trade war between the U.S., Mexico, Canada, China, and Europe is going to fundamentally mess with the global economy. In short, you’re going to see a serious decline in some stock prices. But, as always, war offers the opportunity to prosper. Identify which stocks will survive a potential crash and buy them at their weakest for long-term gains and regular dividends.

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 Victoria Hetherington has no position in any of the stocks mentioned.

More on Dividend Stocks

Man data analyze
Dividend Stocks

2 Canadian Dividend Stocks With 6% Yields That Are Too Cheap to Ignore

These top TSX dividend stocks now offer high yields.

Read more »

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

TFSA Investors: Put $45,000 in These Top TSX Stocks and Watch Your Passive Income Roll In

Are you looking to retire early? Here are a few ideas about how your TFSA could earn a passive-income stream…

Read more »

Human Hand Placing A Coin On Increasing Coin Stacks In Front Of House
Dividend Stocks

Love Passive Income? Here’s How to Make Plenty of it as a Real Estate Investor

You could definitely create passive income by investing in pure real estate, but you could make just as much, if…

Read more »

Make a choice, path to success, sign
Dividend Stocks

2 High-Yielding Dividend Stocks You Can Buy and Hold for Years

These two high-yielding dividend stocks can be the perfect addition to your portfolio, as the bear market causes payout yields…

Read more »

Retirees sip their morning coffee outside.
Dividend Stocks

TFSA Wealth: How to Turn $88,000 Into $1 Million for Retirement

Canadians can use the TFSA to hold a basket of diversified equity investments, allowing you to turn a $88,000 investment…

Read more »

Electricity high voltage pole and sky
Dividend Stocks

Better Buy: Algonquin Stock, Brookfield Renewable, or Fortis?

Algonquin Power stock, Brookfield Renewables, and Fortis are well known Canadian utility stocks. But which one is a better buy…

Read more »

Dollar symbol and Canadian flag on keyboard
Dividend Stocks

3 Canadian Gems to Buy Amid Rising Interest Rates

Here are top TSX stocks that could keep outperforming broader markets.

Read more »

data analyze research
Dividend Stocks

TFSA: Invest $29,000 in These 3 Stocks and Earn $515 Each Month in Passive Income in 2023

The benefits of the TFSA can be leveraged to hold a basket of dividend stocks and generate a stream of…

Read more »