There are a lot of dividend stocks to pick from in today’s turbulent market. Mr. Market can’t seem to make his mind up about his pricing of certain stocks. With the bond market jitters have spread to the stock market, and depending on the day’s trajectory of the U.S. 10-year Treasury note, we could have a growth-to-value rotation or a reverse rotation. It’s getting pretty ridiculous. Add coronavirus variant concerns into the equation and the bubbles floating around (think Bitcoin), and there’s no question as to why investors can’t seem to relax these days.
Rather than wasting your time trying to predict what the bond or stock markets will do over the near-term, focus on analyzing individual companies. And regardless of what some talking head on TV says is up next for markets, you should scoop up the bargains as they appear. Volatility will remain, and value investors should embrace such volatility, as it’ll pave the way for bargains.
Stock pickers should embrace the volatility
Steep rotations, reversals, and all the sort have made even the most wonderful dividend payers like Algonquin Power & Utilities (TSX: AQN)(NYSE: AQN) fall into the bargain bin. And they should be picked up, even if you’re in the belief that we’re long overdue for a market correction.
Because like it or not, a correction is always around the corner. The thing is, nobody knows if the rally ahead of the correction will result in net gains. And nobody will know when the correction bottoms. So, if you’ve got excess cash on the sidelines, start putting some of it to work in freshly-corrected plays with strong business models.
A Canadian dividend growth stock that’s fresh off a correction
Algonquin stock recently plunged 15% from peak to trough before bouncing back modestly just shy of the $20 mark. Today, shares are down 12% from their high thanks in part to broader market jitters and a quarterly report that was less than stellar, to say the least.
The green energy kingpin missed the mark on its fourth-quarter earnings. The disappointing results were served up with a side of a disappointing 2021 guidance reiteration, as a result of the nasty storms that hit Texas last month. Despite the weaker than expected quarters and downplayed guidance, the longer-term fundamentals remain as strong as ever. The company reiterated its investment plan that will extend into 2025 and will act as a means to support meaningful dividend growth for years to come.
The initial reaction to the quarter was mildly negative, but the stock has since crept higher. I think investors should load up on shares before the next leg up. The stock sports a juicy, well-covered 4% dividend yield, which will grow at an above-average rate over time.
Yes, there are near-term pressures, but Algonquin remains one of the best dividend growth stocks on the TSX.
Chris MacDonald, my colleague here at The Motley Fool Canada, seems to think Algonquin is a long-term investor’s dream stock. While I wouldn’t take it as far as saying the name will power the EV revolution, MacDonald is right to be pounding the table on the stock and its “bond-like income” stream after its latest dip.
