BCE (TSX: BCE) and Enbridge (TSX: ENB) are two Canadian dividend titans that make sense to buy on any sustained bouts of weakness. As you’re probably aware, a stock’s dividend yield tends to move up when the share price moves lower. And if no dividend cuts are in the cards (it seems incredibly unlikely that the payouts of either BCE or Enbridge will be slashed), it’s the long-term, income-focused investor that could walk away with a potential bargain.
It’s never easy to buy on historic weakness. But it’s definitely worth doing if you’re looking to endure some painful moves in the medium term to set your future self up with a pretty stellar source of passive income. Arguably, the recent sell-off in some of the higher-yielding dividend stocks, I believe, is a rare opportunity to average down your cost basis and raise your income stream’s overall yield.
Though chasing yield is never a good idea, I do believe that investors should put in the homework when it comes to the fallen high-yield blue chips, as they could hold the biggest long-term opportunity on the TSX Index right now.
BCE and Enbridge: Dividend yields keep climbing!
At writing, shares of telecom titan BCE and pipeline king Enbridge sport yields of 7.51% and 8.04%, respectively. Indeed, it certainly seems like the yields keep climbing higher every time you check in on them. The fact of the matter remains that each firm is in a massive slump, thanks in part to high rates and grim macro forecasts.
Even with a recession looming, I’d argue that the selling activity is overdone. And though the yields seem too good to be true, I’d argue that they’re not, given guaranteed investment certificates (or GICs) could offer a rate close to 6%. That’s huge. But unlike BCE or Enbridge, that rate won’t be guaranteed to stick around once your GIC matures. In due time, rates will retreat. But the yields of BCE and Enbridge (assuming no dividend cuts) aren’t going anywhere.
Of course, if you wait for shares to bounce back, you won’t get as much yield as you will today. That makes shares of both firms worth buying while they’re under pressure.
Though I like BCE and Enbridge here, I think there’s more value to be had in a name like Quebecor (TSX: QBR.B).
Quebecor
Quebecor is a Quebec-focused telecom that doesn’t have as competitive a dividend yield as some of its telecom peers. Still, the stock looks richer, with value at 10.4 times trailing price-to-earnings.
Further, its longer-term growth runway seems more intriguing if it chooses to pursue its national expansion more aggressively. Indeed, the 4.3% dividend yield may not be as appealing as even a GIC. However, I view the stock as one of the more attractive value options in the market right now.
Freedom Mobile, I believe, is a key piece that could help Quebecor really gain ground over rivals. However, it’ll probably take more than a decade for the likes of BCE to really feel the heat from the relative newcomer to Canada’s national wireless scene.
Either way, I’m a big fan of the stock and would actually prefer it to BCE (or even Enbridge) if you’re comfortable with trading off yield for value and growth potential.
