COVID Market Crash: These 3 Dividend Stocks Can Make a Strong Comeback!

There’s still much room for these dividend stocks to recover. Get paid well while you wait for price appreciation!

| More on:
crashing stocks

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

Some stocks still haven’t fully recovered from the COVID-19 market crash — these three dividend stocks included. They can make a strong comeback on an economic recovery after the pandemic comes to pass.

A&W Revenue Royalties Income Fund (TSX:AW.UN), Brookfield Property Partners (TSX:BPY.UN)(NASDAQ:BPY), and H&R REIT (TSX:HR.UN) are still down about 23%, 29%, and 52%, respectively, year to date. Let’s take a look at each dividend stock idea more closely.

AW.UN Chart

Data by YCharts. The year-to-date price action of AW.UN, BPY.UN, and HR.UN stocks. 

A&W is paying a special dividend!

A&W is all about cash flow. It earns royalties of 3% of the gross sales from 971 A&W restaurants across Canada. When the pandemic forced the temporary closures of some restaurants, it resulted in a big cut in its cash flow. Consequently, it suspended its monthly cash distribution of $0.159 per unit from April to June.

As soon as the macro environment allowed it, since July, A&W has resumed a regular monthly cash distribution of $0.10 per unit. Last week, it announced a special cash distribution of $0.30 per unit that it’ll be paying out on October 30 to unitholders of record on October 23. The stock has popped about 5% since the news.

Management will continue to monitor sales results of the restaurants in its royalty pool and make changes accordingly to its regular cash distribution, which highly depends on the pandemic situation and whether there will be another economic lockdown.

Based on its current regular cash distribution, A&W yields about 4%. A recovery of the stock price to pre-pandemic levels would result in an upside of about 30%.

Diversified real estate stocks providing big dividend income

Brookfield Property and H&R REIT both have a portfolio of diversified real estate properties. As shown in the graph at the start of the article, BPY stock has had a quicker rebound than H&R REIT. A big reason is that BPY has amazingly managed to sustain its massive cash distribution so far, while H&R REIT cut its distribution in half in May to be prudent.

A big part of the real estate stock returns come from their cash distributions. Investors have therefore bid up BPY stock sooner than H&R REIT. At writing, Brookfield Property and H&R REIT yield 10.3% and 6.8%, respectively.

Brookfield Property can pay for most of its cash distribution with the cash flow it generates from its real estate portfolio. The rest of the distribution may be paid from cash on its balance sheet if management chooses to. It has enough cash to pay for more than one year of cash distributions without relying on its cash flow.

BPY will report third-quarter results on November 6, at which time there will be greater clarity on the pandemic impacts, which is changing rapidly, on its business.

H&R REIT can make a stronger comeback than BPY on an economic recovery, because it has ample room to recover its cash distribution to close to pre-pandemic levels. When it starts increasing its cash distribution again, it will be a big indicator of improvement and drive its stock price much higher. A doubling of the stock price is not farfetched.

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 Kay Ng owns shares of A&W, Brookfield Property Partners and H&R REAL ESTATE INV TRUST. The Motley Fool recommends Brookfield Property Partners LP.

More on Dividend Stocks

analyze data
Dividend Stocks

2 Safe Dividend Stocks That Could Help You Fight Inflation

A dependable stream of passive income is one way to help offset rising inflation rates. Here are two top dividend…

Read more »

edit Person using calculator next to charts and graphs
Dividend Stocks

Stay Invested in a Recession: Increase Positions in 2 Value Stocks

The suggestion of market analysts is to increase positions in two value stocks if you want to stay invested amid…

Read more »

Hand arranging wood block stacking as step stair with arrow up.
Dividend Stocks

3 Dividend Stocks to Buy as Inflation Surges in Canada

If you're worried about how surging inflation may impact your portfolio, here are three of the best dividend stocks to…

Read more »

You Should Know This
Dividend Stocks

High Inflation: The Good and the Bad for Canadians

Consider tucking away some of your long-term savings in quality dividend stocks like Brookfield Infrastructure in this correction.

Read more »

STACKED COINS DEPICTING MONEY GROWTH
Dividend Stocks

TFSA Investors: Turn $1,000 Into $10,000 in 10 Years

10-fold growth within a decade is rare but not unheard of. You can capture this growth either by predicting a…

Read more »

edit Real Estate Investment Trust REIT on double exsposure business background.
Dividend Stocks

1 Oversold REIT Stock to Buy for Safe Dividends

If you're looking for stable dividend income from an oversold stock, this office REIT is a perfect option.

Read more »

edit Real Estate Investment Trust REIT on double exsposure business background.
Dividend Stocks

3 Cheap Canadian REITs to Buy in 2022

Are you looking for passive income? Start treasure digging in cheap Canadian REITs in this market correction!

Read more »

Dividend Stocks

TFSA Passive Income: 3 Undervalued, High-Yield TSX Dividend Stocks to Buy Now

These top TSX dividend stocks with high yields now look attractive to buy for TFSA passive income.

Read more »