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Got $3,000? 3 Dividend All-Star Stocks to Buy and Hold

Ambrose O'Callaghan | August 14, 2020| More on:

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Back in May, I’d discussed whether investors should “sell in May and go away.” Murmurs over high valuations and a sketchy economy had already grown loud at the time. Fast forward to the middle of August, and North American markets are still on a roll. Predicting the timing of a market correction is a fool’s errand.

However, we should not ignore indicators that show this market is overvalued. Today, I want to look at three dividend all-star stocks that are worth scooping up for investors who have cash to use.

This dividend all-star stock is on the recovery path

PrairieSky Royalty (TSX:PSK) is a Calgary-based company that holds crude oil and natural gas royalty interests across Canada. Its shares have dropped 35% in 2020 as of close on August 13. However, the stock has climbed 16% month over month. This dividend all-star stock is on the recovery path in the energy sector.

In the second quarter of 2020, the company delivered funds from operations (FFO) of $21.3 million compared to $58 million in the prior year. This was a significant decline from Q2 2019, but it was still a solid result in a very challenging macro environment. In June, the company still declared a quarterly dividend of $0.06 per share. This represents a 2.5% yield.

Shares of PrairieSKy last had a favourable price-to-book value of 0.9. It is still trading on the lower end of its 52-week range.

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One undervalued stock with a strong history of income increases

Thomson Reuters (TSX:TRI)(NYSE:TRI) is a multinational media giant based in Toronto. Its stock has climbed 8.1% in 2020. Shares have increased 14% year over year. Thomson Reuters is a dependable dividend all-star that looks undervalued at the time of this writing.

The company released its second quarter 2020 results on August 5. Revenues fell 1% from the prior year to $1.40 billion and cash flow from operations soared 288% to $422 million driven by higher costs and investments in 2019.

Its shares currently possess a price-to-earnings ratio of 23, putting Thomson in favourable value territory relative to industry peers. It offers a quarterly dividend of $0.38 per share, which represents a 2% yield.

A dividend all-star stock in the energy space that is undervalued

Inter Pipeline is the last dividend all-star stock I want to look at today. This company is engaged in the petroleum transportation and storage, and natural gas liquids processing businesses in Canada and Europe. The stock has dropped 34% so far this year. Shares have jumped 29% in a three-month span.

Oil sands transportation funds from operations (FFO) rose slightly from the previous quarter on the back of higher capital free revenue.

Shares of Inter Pipeline last had a P/E ratio of 18 and a P/B value of 1.4, putting the stock in attractive value territory in the middle of August. It was forced to reduce its monthly dividend payout to $0.04 per share, representing a 3.3% yield.

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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 Ambrose O'Callaghan has no position in any of the stocks mentioned.

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