A Cheap Dividend Stock for Your TFSA

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) is a baby that’s being thrown out with the bathwater. Why I’d buy the stock today.

| More on:
hand using ATM

Image source: Getty Images

Monday was a disaster for stocks, as the trade war may have turned into a currency war with China’s devaluation of its currency in response to Trump’s latest slate of tariffs.

That said, it’s easy to hit the sell button, Foolish investors realize that doing well in the market depends not on timing the market, but time in the market. And although time spent in the market these days will be more painful, it’s important to remember that stocks aren’t mere symbols and numbers that move based on the words or actions of either President Trump or Xi.

Many of the stocks that got clobbered over the last few trading sessions have absolutely nothing to do with the Chinese market (or the U.S. market for that matter).

While the U.S. and Chinese economic weakness will undoubtedly cause a chain reaction that’ll be felt across the global markets, I do think many TSX stocks are being treated as a baby that’s being thrown out with the bathwater.

If you’re looking to give your TFSA a market-beating edge, you’ll have to go against the grain and pick up shares of unfairly beaten-up securities. That means buying when everybody else is selling.

As everybody acts on raw emotion, the degree of market efficiency will be temporarily lowered, and those of us who can keep our cool will be the ones that will end up coming out on top when it comes time to be bullish again for whatever reason (a more dovish Fed in response to China’s currency devaluation, or “progress” in future talks between Trump and Xi).

Consider Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM), an example of a stock that shouldn’t sell-off on the latest escalation of the tit-for-tat spat, but will likely do so anyway.

CIBC is a domestic bank at heart with a small, growing U.S. business. The bank is trading at around eight times forward earnings thanks to issues experienced on this side of the border and the credit decay that arrived with the maturation of the credit cycle.

The geopolitical turmoil is bad news for the global economy, but CIBC has more pressing issues on its hands. It appears as though CIBC has fallen so far that there isn’t much else that could bring shares much lower.

The bank has a history of shooting itself in the foot, and given today’s severely depressed valuations; it appears that investors are already bracing themselves for the worst.

Despite having minimal exposure to the U.S. and China relative to its bigger brothers, CIBC will likely still witness a sell-off with its Big Five peers because it’s the one bank stock that investors love to hate.

Over the coming weeks, I suspect that CIBC will be the baby that’ll be thrown out with the bathwater as the appetite for equities begins to fade as uncertainties mount.

The stock may soon sport a 6% dividend yield after the next market-wide purge, so if you’re looking for a top name to pick up in the upcoming sale, look no further than CIBC: Canada’s most underrated and undervalued bank.

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 Joey Frenette owns shares of CANADIAN IMPERIAL BANK OF COMMERCE.

More on Dividend Stocks

Two seniors float in a pool.
Dividend Stocks

TFSA: How to Earn $1,890 in Annual Tax-Free Income

Plunk these investments into your TFSA to earn passive income and avoid the taxman.

Read more »

Engineers walk through a facility.
Dividend Stocks

1 TSX Stock I Wouldn’t Touch With a 10-Foot Pole

AtkinsRéalis (TSX:ATRL) is one TSX stock I'd never invest in.

Read more »

edit Woman in skates works on laptop
Dividend Stocks

3 No-Brainer Stocks to Buy Under $30

These three stocks all offer a huge deal for investors looking for dividends, as well as growth that will last.

Read more »

You Should Know This
Dividend Stocks

How to Convert a $300 Monthly Investment Into $338 in Monthly Income

If you want a certain amount in monthly passive income, invest a similar amount today and leave the rest to…

Read more »

Increasing yield
Dividend Stocks

3 Income Stocks With Big Yields to Consider in April 2024

If you haven’t yet made your March investments, here are three income stocks to buy the dip and lock in…

Read more »

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Dividend Stocks

RRSP Investors: Don’t Miss Out on This Contribution Hack!

This hack has so many benefits for you -- not just when you put it in your RRSP but for…

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

Passive Income: 2 Safe Dividend Stocks to Own for the Next 10 Years

Dividend stocks such as Manulife and Fortis can help you generate a stable and recurring passive-income stream.

Read more »

Young woman sat at laptop by a window
Dividend Stocks

3 Dividend Stocks Everyone Should Own for the Long Haul

For investors looking for top-tier dividend stocks to buy and hold for the long term, here are three of my…

Read more »