For many investors, 2018 was a lost year. Many of us are down after the recent correction, and while Mr. Market’s erratic behaviour will likely continue in the new year, as an investor, it’d be prudent to be an owner of dividend-paying stocks, so at least you can collect your quarterly payouts, as the stocks continue to fluctuate.
Without further ado, here are two strong dividend (growth) stocks that possess a considerable margin of safety at current levels to go with attractive upfront dividends and above-average potential for dividend growth.
Restaurant Brands International (TSX:QSR)(NYSE:QSR)
The Canadian fast-food juggernaut behind Tim Hortons, Burger King, and Popeyes Louisiana Kitchen has taken a hit to the chin of late.
Given the fact that Restaurant Brands is a seller of fast food, which is an “inferior good” that fairs better in harsh economic environments, and the above-average dividend, which currently yields 3.3%, you would think that Restaurant Brands stock would have benefited from the recent flocking of investors toward more recession-proof, dividend-paying names.
Clearly, investors didn’t get the memo that Restaurant Brands is a preferred investment for riding out tough times. And because the name has continued to fluctuate between $69 and $85 over the last several months, investors may want to think about backing up the truck today, as the stock is now on the lower end of the channel and could be overdue for a big jump that will probably be triggered by a favourable earnings report.
Restaurant Brands has exceptional stewardship in 3G Capital and a clear runway for growth, so the 16 times trailing P/E, I believe, doesn’t appear to make any sense whatsoever. The way I see it, you’re getting a $100 stock for $72 — an even better deal than a burger on Whopper Wednesday.
It’s the cheap bank stock that keeps getting cheaper. Now sporting a 5.1% dividend yield, CIBC is, once again, trading with a single-digit trailing P/E multiple thanks to a rare earnings miss that exacerbated the decline caused by a pullback in the broader markets.
CIBC doesn’t miss often, but when it does, investors tend to overreact, because they’ve grown accustomed to the consistent beats (or meets). Meeting or beating analyst expectations isn’t the norm, and although CIBC’s streak is over, there’s no evidence that’s suggestive that CIBC’s recent miss is the start of a downward trend.
The bank has an underrated management team that’ll be busy cutting costs at CIBC Bank USA over the next year or so, and while the bears will point out the company’s overexposure to the domestic housing market as a single point of failure, one has to think that these same investors would be more bullish over the slowed mortgage growth and the focus on the bolstering of the U.S. business.
That hasn’t been the case though, as there are contrary arguments over CIBC’s U.S. business, which was a sore in the latest quarter, and concerns that CIBC is losing ground to peers when it comes to domestic mortgage growth.
Ignore the noise. CIBC is so ridiculously cheap at 8.4 times next year’s earnings, and given you’re getting a now more diversified mix of exposure to retail banking, capital markets, and wealth management from Canada and the U.S., I think the stock is a must-own deep-value play for prudent, income-oriented investors.
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Fool contributor Joey Frenette owns shares of CANADIAN IMPERIAL BANK OF COMMERCE and RESTAURANT BRANDS INTERNATIONAL INC. The Motley Fool owns shares of RESTAURANT BRANDS INTERNATIONAL INC.