Beginner investors don’t have it easy, with the TSX Index inching ever so closer to bear market territory (a 20% drop from peak levels) and interest rates ready to rise further in the second half of 2022.
Though equities seem less investable, they’re arguably still one of the better asset classes to own to stay ahead of inflation. Bond yields may be slightly higher, but fixed-income debt securities will still leave one well behind on a real return basis (that’s returns after inflation). Further, cash and cash equivalents will leave one feeling the full impact of today’s high inflation.
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How to fight inflation with dividend stocks
Though the Bank of Canada shocked many investors with a full (100-bps) rate hike this month, those scorching-hot inflation numbers aren’t expected to roll over anytime soon. Inflation could surpass the 8% mark before it peaks in the second half. For investors, that means overweighting cash and risk-free assets like GICs (Guaranteed Investment Certificates) may continue to be a losing proposition from a purchasing power standpoint.
To beat inflation, stocks may be the best game in town. And in this piece, we’ll look at two beginner-friendly dividend stocks that investors may wish to buy now and hold for many years, if not decades at a time.
Consider shares of TD Bank (TSX:TD)(NYSE:TD) and Restaurant Brands International (TSX:QSR)(NYSE:QSR).
TD Bank
With the First Horizons acquisition in the books, TD Bank will expand upon its already sizeable and impressive U.S. banking business. The nearly US$14 billion takeover is expected to complete in February of 2023, providing TD with more than 1,100 branches. Undoubtedly, the deal is one of the largest in years. Though the deal will take time to pay off, I think TD’s M&A appetite will lead to superior risk-adjusted returns over the long run.
TD is an incredibly well-run bank with exceptional managers. And it’s not done bargain hunting quite yet, as valuations across the board begin to retreat ahead of what could be a mild recession. The firm noted it’s looking at a potential acquisition of American broker Cowen.
Such a deal is intriguing, to say the least. As valuations continue to be pummeled in the financial space, TD may have a chance to walk away with a bargain. With a 4.5% yield and a 9.8 times trailing earnings multiple, TD stock looks like a deal that’s too good to pass up for beginner investors seeking passive income, growth, and long-term gains.
Restaurant Brands International
Restaurant Brands holds three cherished fast-food icons in Tim Hortons, Burger King, and Popeyes Louisiana Kitchen. Though the brands are powerful, the stock has been anything but over the past five years. Indeed, management had more than its fair share of missteps, especially as the COVID crisis weighed.
Though the company is taking steps to better itself and close the gap with its better-performing rivals, the valuation seems to suggest that QSR stock is a lost cause. Personally, I view it as a screaming bargain. Like TD, QSR has been hungry for acquisitions. Its Firehouse Subs deal went under the radar but could be a source of significant sales growth over the next 10 years and beyond.
