One of the best times to buy dividend stocks is when they are discounted. The yield is up, and the recovery can lead to capital appreciation. This makes dividend stocks, which are already attractive thanks to their fundamental strengths, more attractive as investments.
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A bank stock
Bank stocks in Canada are already quite attractive for their dividends. But with a 30% discount from its 2022 peak pushing the stock down into undervalued territory and the yield up to the top of the big six banks (6.5%), Bank of Nova Scotia (TSX:BNS) currently stands out from the rest of the bunch.
The Canadian banking sector is quite conservative, which is reflected in the performance of individual banking stocks when compared to American banking stocks. However, this also makes Canadian banks safer, especially when it comes to dividends. The payout ratios are usually quite stable, indicating the financial sustainability of the dividends.
Plus, all six major banking institutions in Canada are dividend aristocrats that have been growing their payouts for about a decade or more. The Bank of Nova Scotia has been growing its payouts for a decade. So sustainable dividends, modest dividend growth potential, a hefty discount, undervaluation, and, most importantly, a powerful yield make it a compelling buy in June 2023.
In the long term, the stock may also offer some capital appreciation, but dividends would still be the primary reason to consider this stock.
A telecom stock
Telus (TSX:T) is currently the most heavily discounted telecom stock out of the three major players in the telecom sector. It has fallen by about 26% from its 2022 peak, and the downward movement continues.
The discount may become more significant over time, or the stock may turn around and start going up in a few days. If that happens, you will lose the chance to benefit from the discount it’s offering right now or lock in the generous 5.7% yield.
There are several other reasons to consider Telus as a long-term holding. In the last decade, the telecom has offered a decent mix of dividends and capital appreciation potential, and its growth has been the most consistent of all three major telecom companies in Canada. It is also diversifying to new markets like telehealth, home security, and tech services and exploring new growth avenues.
Telus has a strong chance of becoming the top 5G stock in Canada as the company is investing heavily in the 5G infrastructure. The higher speed network may prove to be a powerful growth avenue as more IoT devices reliant upon the 5G network come online.
Foolish takeaway
These two dividend aristocrats are good dividend picks for June 2023, thanks to the discounts and high yields. They are also compelling long-term holdings that can help you generate a decent dividend income from your TFSA. So if you are looking for dividend stocks you can buy and forget in your TFSA, these two should be on your radar.
