2 Heavily Discounted Dividend Kings To Buy and Hold Forever

The Great-West Lifeco stock and the Royal Bank of Canada stock are your best buys in the pandemic. Both are dividend kings trading at depressed prices. If you buy now, you can keep them during your lifetime.

| More on:
Gold king in chess game face with the another silver team on black background (Concept for company strategy, business victory or decision)

Image source: Getty Images

COVID-19 struck like a lightning bolt in 2020, bringing unprecedented destruction and total disruption of everyday life. The investment landscape was turned into a no man’s land, meaning you invest at your risk.

Slowly, however, the stock market is recouping the losses from the market selloff. The consolation is that established dividend kings have not cut dividends, although the prices are heavily discounted. Income investors have the opportunity to buy the stocks at a discount and hold the assets forever.

Back to Dividend Aristocrat status

Great-West Lifeco (TSX:GWO) is cheaper by 26% at present versus its 2019 year-end price of $31.26. At $23.80 per share, you will partake of the high 7.37% dividend. Imagine earning $1,842.50 on a $25,000 investment. In 10 years, your money will be worth $50,906.07, or double the original capital.

Management learned their lessons during the 2008 financial crisis. The company had to cut its dividend, thereby losing its Dividend Aristocrat status. But all that has changed. Great-West took swift action by investing heavily in risk management capabilities.

The business model today is more diversified and resilient. There is balance across geographies, products and risk types. About 69% of Great-West’s invested assets portfolio is in bonds. Similarly, 99% of them are investment-grade. All the right moves in post-2008 are paying off in the pandemic era.

Before COVID-19, this $22 billion financial services holding company already had a strong capital position. According to Great-West’s President and CEO Paul Anthony Mahon, the company can weather this health crisis despite an approximately $300 million reduction in net earnings in Q1 2020.

Best buy

There’s no better deal in the pandemic than owning shares of the largest banking institution in Canada. The Royal Bank of Canada (TSX:RY)(NYSE:RY) is trading at an absurdly bargain price of $89.61. At the close of 2019, the price was $100.43. Your $20,000 will triple in value in 25 years owing to its 4.90% dividend.

RBC will be at the forefront of Canada’s post-pandemic economic recovery. The bank has laid down a five-point plan that should serve as a roadmap for small businesses’ resurgence.

Leaders in the private and public sectors are encouraged to streamline relief programs for recovery. RBC recommends investing in the capacity of every enterprise to reopen safely. The third suggestion is the creation of new networks for a massive digital push.

The last two points are the implementation of new economic strategies so businesses could scale and adoption of a more strategic approach to globalization. From an investment standpoint, RBC is too big and formidable to fall. For small businesses, the banking giant wants the policy motto to be “too small to fail.”

RBC is fully supporting small businesses because they are the Canadian economy. If business activities return to pre-corona levels, the sector can contribute more than 40% of GDP again. Also, the industry will bring in 60% of new jobs like before.

Reason to stay invested

The sharp drop in stock market values is worrying, but not necessarily a reason to stay away. There are dividend kings that will help you pursue long-term financial goals minus the anxiety.

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 Christopher Liew has no position in any of the stocks mentioned.

More on Dividend Stocks

grow money, wealth build
Dividend Stocks

2 Ultra-High-Yielding TSX Stocks to Buy With $1,000

You don’t need thousands to start investing. Here are two super high-yielding TSX stocks to buy now that can provide…

Read more »

Business success with growing, rising charts and businessman in background
Dividend Stocks

How to Turn $15,000 Into Reliable Passive Income for Decades

If you only have $15,000 to invest today, here’s a mini portfolio that could produce passive income annually (and potentially…

Read more »

man slides
Dividend Stocks

TFSA Investors: Where to Put That New $6,500 Contribution Room

These stocks may be trading high, but they still offer value for TFSA investors seeking out the best stocks to…

Read more »

Dividend Stocks

2 TSX Companies With Dividends That Outpace Inflation

The stellar yields of these Canadian dividend stocks make them an attractive investment amid a high inflationary environment.

Read more »

Double exposure of a businessman and stairs - Business Success Concept
Dividend Stocks

1 Overlooked Dividend Stock (Yielding 5.6%) to Buy in January 2023

Great-West Lifeco Inc. (TSX:GWO) is an underrated dividend stock that warrants the attention of investors in early 2023.

Read more »

stock analysis
Dividend Stocks

1 Oversold Dividend Stock (Yielding 3.24%) to Buy in January 2023

Looking for a deal? This dividend stock is still near oversold territory, with a dividend I'd lock up right now.

Read more »

edit Business accounting concept, Business man using calculator with computer laptop, budget and loan paper in office.
Dividend Stocks

5 Top Dividend Stocks to Buy With Decades of Passive-Income Potential

Any Canadian investor can enjoy passive income from these dividend stocks that tend to increase their payouts over time!

Read more »

value for money
Dividend Stocks

3 TSX Stocks That Are Too Cheap to Ignore

You can buy cheap TSX stocks such as Suncor and Nuvei right now to enjoy outsized gains once the markets…

Read more »