As a long-term passive income investor, you shouldn’t fear dividend-paying stocks that have dipped a bit, with yields that are slightly higher than where they normally are. Undoubtedly, none of us want to find ourselves taking an uppercut to the chin at the hands of a dividend cut. Dividend reductions aren’t just an ominous sign of things to come, they could spark a rush to the exits, given a lot of passive income investors are drawn in by dividends.
When times get tough and dividends get stretched, investors may wish to put in the extra homework to ensure that the state of a payout is sound. A recession doesn’t necessarily mean a dividend is poised to be slashed by some amount. There are some resilient companies out there that have durable operating cash flow streams, or enough dry powder on the balance sheet to “dampen” the blows that a recession-hit market will throw its way.
In any case, we’ll check out two reliable dividend payers in this piece that I view as pretty good value for money going into June 2023.
National Bank of Canada
First up, we have National Bank of Canada (TSX: NA), a Canadian bank that’s done a spectacular job of crumbling under the heat of macro headwinds and recent U.S. regional banking worries. The stock currently sits down just 4.5% from its all-time highs!
Indeed, being a domestic bank comes with its perks. Though NA stock dipped back in March, when SVB Financial went down, the recovery was swift. The same cannot be said for some of National Bank’s bigger brothers in the Canadian banking scene.
At writing, shares trade at 10.6 times trailing price-to-earnings, with a 3.88% dividend yield. National Bank may not be the cheapest, but it’s a domestic play that has proven itself as a worthy member of the Big Six. A smaller market cap (National Bank’s a $33.8 billion company) isn’t necessarily a bad thing. With stellar stewards running the show, NA stock arguably deserves a slight premium to the pack.
For now, I view the banking underdog as having its moment to shine. I’d not be afraid to consider the name here for its steady dividend, which looks to be standing on very solid ground.
Sun Life Financial
Sun Life Financial (TSX: SLF) is a well-run life insurance and wealth management company that’s down around 9% from its all-time high hit in early 2022. In the latest round of earnings results, the company saw a bit of weakness in the asset management division (slipped 12%) as a result of broader market volatility.
Fortunately, management sees a path higher and a bit more stability on the front of interest rates. With a rocky 2022 now in the rearview, I see SLF stock as a very compelling value stock in the financial space. With a 12.1 times trailing price-to-earnings multiple and a 4.48% dividend yield, SLF stock seems like a great pick for the post-recession economy, which could kick in as soon as 2024. For now, I’m staying bullish in spite of recent choppiness.
