We all have been listening and reading in the investment community that the recent market crash is a lucrative opportunity. While it may sound insensitive to call a calamity an opportunity, why not make the most of it when we are all staying and working from home?
Many top TSX stocks have fallen more than 40-50% from their record high levels last month. However, it would be wise to stay defensive and stick to stable dividend-paying stocks if the carnage continues.
Dividend stocks can provide a stable income, which can partially compensate a capital loss. We will look at stocks that offer stable dividends as well as growth so that TFSA investors can reap significant benefits. After all, dividend and capital gains will be tax-free for TFSA investors throughout the life of the investment and at withdrawals as well. Let’s see which dividend stocks could be worthy plays amid this market crash.
Chemtrade Logistics Income Fund (TSX:CHE.UN) is a chemical and services company that serves North America and the rest of the world. It has a diverse product portfolio and is the largest supplier of sulfuric acid in North America.
A $365 million company, Chemtrade stock has lost approximately 50% of its value since last month. The COVID-19 outbreak severely dented the global supply chain, which has weighed on its stock recently. The stock is trading at its all-time lows, and I believe it could find a bottom soon.
Chemtrade is currently trading at a dividend yield of more than 16%. However, investors should not be greedy of its high yield; neither should they totally shun it. Its five-year average yield comes around a robust 8%. The company has kept its dividends stable for more than 15 years. It did not trim dividends during the 2008 financial meltdown either; thus, passive investors can count on its stable monthly dividends.
With a discounted valuation and a handsome dividend profile, I think Chemtrade offers a favourable risk/reward play for long-term investors.
A Canadian midstream energy company Inter Pipeline stock looks attractive, particularly after the recent selloff. It has corrected a massive 65% in just last month. Coronavirus fears and weak energy markets have weighed on Inter stock during this period.
Inter Pipeline stock is currently trading at a dividend yield of 27%. Its five-year average yield comes around 7% and looks solid. The recent fall made the yield surge significantly.
Midstream companies have little or no direct exposure to volatile oil and gas prices as oil-producing companies have. Thus, these are relatively safe bets. Midstream stocks such as Inter Pipeline might see faster growth once broader equities and energy markets normalize in the medium to long term.
I again want to warn our readers that high-yield stocks do not necessarily mean they are attractive investments. In my view, these stocks do not look attractive just based on their current high yields. Their historical yields are juicy compared to broader markets as well. Their stable dividend profiles and earnings prospects, along with cheap valuations, also make these two seem strong in the current market scenario.
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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 Vineet Kulkarni has no position in any of the stocks mentioned.