2020 was a year that it paid off to chase momentum, the most exciting growth stocks, and the tech disruptions, with little attention paid to valuation. While there’s no telling whether growth and momentum will continue to outperform this year, I think it’s a mistake to sleep on some of the more promising value names out there.
If higher equity valuations are justified given how ridiculously unrewarding bonds have become in an era of low rates, then some of the Canadian Dividend Aristocrat sleeper picks may prove to be massive steals at current levels. Some top Dividend Aristocrats are trading at discounts based on their historical valuation metrics, and it’s these plays that I believe could offer investors the best risk/reward trade-off, as volatility picks up in what’s sure to a bumpy year of recovery.
2021: A year that’ll see the return to value stocks?
To find the greatest bargains, you’ve got to look to the most unloved areas of the market. The COVID-19 crisis weighed heavily on some sectors more than others. With numerous vaccines ready to conquer the insidious coronavirus, firms within some of the hardest-hit industries, I believe, could have the most room to run as the COVID-19 headwinds they face finally begin to fade for good.
In this piece, we’ll have a look at one hard-hit Dividend Aristocrat that I think could give investors a good chance at market-beating gains over the next 18 months, as the page is turned on this pandemic to a potential discretionary spending boom that could fuel the so-called roaring 20s.
Consider shares of BCE (TSX:BCE)(NYSE:BCE), one of the bluest blue chips on the TSX Index with a bountiful (and safe) dividend that currently yields 6.1%. The telecom giant took a left hook at the hands of the horrific COVID crisis but is poised to make up for lost time as the world inevitably returns to post-pandemic normalcy.
BCE: A top Dividend Aristocrat to buy ahead of the “roaring 20s?”
The Canadian telecom behemoth still sports one of the most robust dividends out there. While its top- and bottom-line numbers have been under pressure amid the COVID-induced decrease in demand for mobile (and roaming) data, I still think that BCE and the telecoms will be among the first firms to see their numbers surge back to and potentially above 2019 levels.
The rapid adoption of the next generation of telecom tech, most notably 5G, may have been pushed back by several months as a result of the crisis. But for long-term investors hungry for yield, a postponed “5G boom” is nothing to worry about.
Many shut-in Canadians are itching to get outside again. A lot of them have savings accounts that have swelled in 2020 due to a lack of fun things to spend money on. As a result, I think the perfect storm could be brewing for the big telecoms like BCE and think a combination of a discretionary spending boom and pent-up demand for travel could fuel an epic rebound in BCE’s numbers and stock price in late 2021 and early 2022.
The Foolish takeaway on one of my favourite Canadian Dividend Aristocrats
BCE’s remarkable dividend probably isn’t going anywhere anytime soon. So, if you seek yield and a shot at outsized returns in an economic reopening, I’d start accumulating shares today while they’re down 16% and being passed on in favour of all these exciting momentum stocks.
Speaking of great value opportunities, check out these Foolish top picks!
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Fool contributor Joey Frenette has no position in any of the stocks mentioned.