Dividend stocks are looking pretty appealing in August 2023. This year, tech stocks have rallied to 52-week highs, even though their earnings results have been only “so-so” and interest rates have risen.
Today, the NASDAQ trades at 32 times earnings. That’s a pretty expensive valuation. However, many dividend stocks are cheap. If you look at Canadian banks, energy stocks, and insurance companies, many of them are trading at 10 times earnings or less. High dividend yields and bargain valuations abound in this space.
In this article, I will look at three dividend stocks I can’t wait to buy in August 2023.
Brookfield (TSX:BN) is a Canadian financial services company. It operates in real estate, insurance, and asset management. Its asset management business used to be wholly owned, but the company spun a large part of it off to investors (more on that in the next section).
Brookfield is not exactly a high-yield dividend stock. At today’s prices, it yields just 1.07%. However, the dividend is very safe, as the company paying it has only a 55% payout ratio (“payout ratio” means dividend divided by earnings; it’s a measure of dividend-paying ability). So, while BN might not have a high yield now, there’s room to raise the payout.
Brookfield’s most recent earnings release wasn’t taken well. In it, the company’s earnings declined 80%, mainly due to a large increase in interest expenses. Brookfield is doing a lot of deals this year and is borrowing to get them done. So, interest is going up, but earnings from the newly acquired companies will make a positive contribution when the companies are fully absorbed.
Brookfield Asset Management
Brookfield Asset Management (TSX:BAM) is the asset management business that Brookfield spun off. Compared to Brookfield, it’s less risky, as it has hardly any debt, but it’s also more expensive. Brookfield Asset Management runs private funds (e.g., real estate and private equity funds) for its investors. This doesn’t require as much capital as investing in companies directly.
So, Brookfield Asset Management has much wider profit margins than Brookfield does. The downside is that it’s a more expensive stock, trading at over 20 times earnings. Perhaps owning Brookfield and Brookfield Asset Management together is the best call.
Canadian National Railway (TSX:CNR) is a Canadian railway stock that I’ve owned in the past. I sold it because I thought that the stock had gotten too expensive. Nevertheless, I maintain my belief that the company itself is a good one. CNR transports $250 billion worth of goods this year, has only one major competitor, and has a valuable rail network that touches on three North American coasts. Not very many railroad companies have these advantages.
CN Railway’s most recent quarter was a bit of a letdown, with a 6% decline in revenue and an 8.3% decline in earnings. It was not a great showing, but CNR has come through periods much tougher than this one (for example, the COVID period) and come back bigger and better. I’d say the stock is a pretty good value today.