Passive-income investors shouldn’t feel the need to wait on the sidelines any longer. There are great opportunities to get swollen yields for modest valuations. Though the bull market may still be a few months away, those who hang onto their dividend-paying shares will still get paid for their patience. Further, the risk/reward scenario on various blue chips seems so enticing now that most investors have looked to other asset classes amid market volatility.
With more nail-biting earnings results coming up, some pundits think there’s fuel for another leg lower. The effects of last year’s rate hikes are starting to be felt. Bank failures and the bursting of various tech bubbles have left many investors at a loss for words.
As the next round of quarterly results come in, there are bound to be firms that fall flat, even in the face of lower estimates. Indeed, not all firms can deal with the effect of higher rates and the fading macroeconomic environment.
It’s hard to tell what central banks will do next, as we enter the latter innings of a battle against high inflation. Ultimately, the Fed sees itself winning in its multi-year war with inflation. The only question is whether the economy takes a subtle jab to the shoulder or a devastating uppercut on the chin.
Will the landing for the economy be soft, hard, non-existent, or somewhere in between? Only time will tell. Regardless, investors seeking passive income have plenty of reasons to stick with stocks over bonds.
Telus stock: An inflation beater perfect for income investors
Telus (TSX:T) stock sports a juicy 5.2% dividend yield at the time of writing. This yield should help Canadians fight off inflation, which is currently in the 5-6% range. It’s not just the yield that makes Telus attractive at these depths; it’s the gains once the bear moves to the sidelines and the bull retakes control.
The Canadian telecoms still stand to profit from the 5G tailwind. And Telus is one firm that’s likeliest to take share away from its peers. Of course, hefty capital expenditures in a rising-rate environment will take away from dividend growth. However, I think firms like Telus can find a balance between returning income to investors and making meaningful strides over its Big Three rivals.
More than a month ago, Telus stated it sees earnings and revenues increasing, even as it clamps down on its spending. Telus could find itself in the sweet spot, as it looks to power through quarterly estimates, which may be too conservative.
Telus is a magnificent firm with a history of topping quarterly estimates, even in volatile environments. At 2.1 times price to sales and 23.6 times trailing price to earnings, Telus stock may not be a screaming bargain, but Telus is a relatively inexpensive way to get a safe, secure, and growthy dividend with a yield north of 5%.
Sure, there are other dividend stocks out there with yields over 7%. However, very few seem likely to grow at a rate that exceeds that of Telus’s dividend over the next five years.
The bottom line
Telus’s 5.2% dividend yield may not stay at these heights by year’s end, especially if we’re in for an economic soft landing. In any case, Telus stock is a great dividend-growth gem to keep on one’s radar, as it manages through a bumpier road.