Canadian investors shouldn’t ignore Canada’s top dividend stocks, even as rates on risk-free debt securities continue to swell.
Undoubtedly, dividend stocks have seemed riskier than ever these days, with some of the high-yielding blue chips now down double-digit percentage points off their highs. Indeed, such dividend stocks seem less desirable these days, especially when you can get 5% without worrying about potential capital losses in the face of an economic recession!
Don’t forget about dividend stocks!
As risk-averse investors continue to look past the dividend darlings that used to be a source of solid capital gains, it may be a good time to reconsider some of the many high-income plays that have been thrown into the bargain bin.
Sure, many may be inclined to pass up such bargains in favour of that juicy risk-free rate. However, by passing up the bargains, one could miss out on an opportunity to score a solid return for a relatively low amount of risk.
Indeed, it’s times when investors are fully aware of the risks that the risk/reward may actually be quite decent.
Without further ado, let’s look at two Canadian dividend stocks that are battered, bruised, and in the bargain bin right now, at least in my opinion.
Fortis
Fortis (TSX:FTS) stock is one of the better bond proxies out there. The stock has become more bountiful in recent years as rates have risen. Indeed, Fortis’s dividend yield has had to swell to be more competitive with the risk-free rate.
With a 4.23% dividend yield, Fortis stock is the most enticing it has been in years. The stock is fresh off a pullback that brought it down around 17% from its all-time highs.
At 18.1 times trailing price-to-earnings, Fortis stock may not seem like a steal. That said, I do view it as a compelling bargain given its steady mid-single-digit growth rate is unlikely to be impacted by a coming recession. With a 0.19 beta, Fortis stock is still a lowly correlated stock to buy if you sense trouble brewing for the broader markets.
Rogers Communications
Rogers Communications (TSX:RCI.B) stock is another Canadian dividend gem that has been under pressure in recent months. The stock dipped from its 52-week high of around $66 to $53 and change, a drop of around 20%.
After a slight ricochet, shares are off nearly 25% from all-time highs. The dividend now yields 3.6%. That’s relatively modest when it comes to battered dividend stocks. And at 18.9 times trailing price-to-earnings, Rogers doesn’t seem all that cheap, either.
That said, Rogers is a powerful force in the telecom scene, with assets from Shaw Communications aboard. In due time, I expect Rogers will be able to ride out the slump, even if Canada falls into recession next year. For now, I view Rogers as a dividend dog that’s worth your attention.
The bottom line for Foolish investors
It’s easy to forget about the boring, beaten-down dividend plays, especially with today’s high risk-free rate. Only time will tell if FTS and RCI.B stock can top the return offered by risk-free assets over the next year. In any case, it’s tough to ignore the value in the names at these levels.
