Dollarama Inc. (TSX:DOL) Is Among Quality Stocks Trading at Lows: Should We Buy the Dips?

Dollarama Inc. (TSX:DOL) stock is down big, but valuations may have further to fall, whereas BCE Inc. (TSX:BCE)(NYSE:BCE) and George Weston Ltd. (TSX:WN) are looking like attractive buys.

| More on:

While I am of the view that investors should maintain a long-term perspective when deciding where to invest, there are times when short-term stock price movements should be acted upon — times when the mispricing of stocks gets to a point when it creates an opportunity to act, or when a stock is either dramatically overpriced or underpriced.

Here I will look at three stocks that have fallen to 52-week lows to determine if any are good buying opportunities.

Dollarama (TSX:DOL)

With its second-quarter fiscal 2019 sales falling short of expectations, Dollarama stock got pummeled last week and is down 17% year to date, falling decidedly from its highs amid a valuation that had gotten stretched, a consumer that is becoming less robust, and a strategy that has increasingly relied on pricing that exceeds its “one dollar” beginnings.

So, where are we now?

Well, with its second-quarter results, the company raised its 2019 outlook, but have investor expectations risen too high?

The stock still trades at a P/E multiple of 25 times this year’s expected earnings, down from when it was trading at 29 times, but still high considering that same-store sales numbers are slowing.

I remain on the sidelines, as I believe the risk is still elevated with Dollarama stock.

BCE (TSX:BCE)(NYSE:BCE)

BCE stock is down 10% versus one year ago, as the wireless market has been ultra-competitive, and as its status as a reliable dividend stock has made it a bond proxy, susceptible to interest rate movements.

But this 5.74%-dividend-yielding behemoth has been a pillar of strength over the long term for dividend investors, with a 107% increase in dividends in the last nine years, free cash flow of more than $3 billion in 2017, and free cash flow as a percentage of revenue of well over 10%.

And longer term, BCE management continues to use this cash flow to reward shareholders but also to invest in the business, currently investing in its wireless business and in its fibre-optic networks, which are the future of the telecommunications business.

In my view, this is a great time for dividend investors to grab a piece of BCE stock.

George Weston (TSX:WN)

George Weston stock has also taken a hit and is now down 10% year to date, which is a lot for a defensive, relatively stable company like this one.

With its ownership of Loblaw Companies, which is seeing improving performance as a result of investments in IT and the supply chain, approaching 50%, and the company’s program to add $100 million to EBITDA by 2020-21, George Weston appears well positioned for improvement.

But this past year has seen many operating challenges and intense competition, so what’s next?

Well, the stock is now trading at a P/E multiple of 14 times this year’s expected earnings, and 13 times next year’s expected earnings, with a 2% dividend yield.

That’s a very attractive price for a defensive stock that has a large cash balance and a strong competitive position.

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 Karen Thomas has no position in any of the stocks mentioned.

More on Dividend Stocks

money goes up and down in balance
Dividend Stocks

This 6% Dividend Stock Is My Top Pick for Immediate Income

This Canadian stock has resilient business model, solid dividend payment and growth history, and a well-protected yield of over 6%.

Read more »

ways to boost income
Dividend Stocks

1 Excellent TSX Dividend Stock, Down 25%, to Buy and Hold for the Long Term

Down 25% from all-time highs, Tourmaline Oil is a TSX dividend stock that offers you a tasty yield of 5%…

Read more »

Start line on the highway
Dividend Stocks

1 Incredibly Cheap Canadian Dividend-Growth Stock to Buy Now and Hold for Decades

CN Rail (TSX:CNR) stock is incredibly cheap, but should investors join insiders by buying the dip?

Read more »

bulb idea thinking
Dividend Stocks

Down 13%, This Magnificent Dividend Stock Is a Screaming Buy

Sometimes, a moderately discounted, safe dividend stock is better than heavily discounted stock, offering an unsustainably high yield.

Read more »

Canadian Dollars bills
Dividend Stocks

Invest $15,000 in This Dividend Stock, Create $5,710.08 in Passive Income

This dividend stock is the perfect option if you're an investor looking for growth, as well as passive income through…

Read more »

A Canada Pension Plan Statement of Contributions with a 100 dollar banknote and dollar coins.
Dividend Stocks

3 Compelling Reasons to Delay Taking CPP Benefits Until Age 70

You don't need to take CPP early if you are receiving large dividend payments from Fortis Inc (TSX:FTS) stock.

Read more »

A worker overlooks an oil refinery plant.
Dividend Stocks

Better Dividend Stock: TC Energy vs. Enbridge

TC Energy and Enbridge have enjoyed big rallies in 2024. Is one stock still cheap?

Read more »

Concept of multiple streams of income
Dividend Stocks

Got $10,000? Buy This Dividend Stock for $4,992.40 in Total Passive Income

Want almost $5,000 in annual passive income? Then you need a company bound for even more growth, with a dividend…

Read more »