Dividend-growth stocks have been quite sluggish over the past year as rates, inflation, and macro fears surged. Indeed, it’s never comforting to be a net buyer of stocks when most others are selling. Still, it’s times like these, when most others are fearful of the unknown, that tend to be the best times to get more bang for your investment buck!
November has been a relieving month so far. But the uneasy feeling could return at the drop of a hat. As such, investors should look to some of the market’s most oversold stocks if they’re looking to play a rebound for the year ahead.
So, without further ado, let’s consider two intriguing stocks that I’d look to bounce back as rates begin to retreat alongside most of the fears weighing on the minds of most retail investors.
CP Rail (or Canadian Pacific Kansas City)
First, we have CP Rail (TSX: CP), a railway with a stock that’s slipped off the rails a bit, now down around 13% from its recent all-time high. Indeed, the railway scene has been under pressure of late, thanks to industry headwinds that have weighed heavily. Margins have taken a bit of a chin, and the company now foresees tougher terrain in the new year. CP Rail may be one of the better-managed railways in North America.
However, it’s not resilient enough to shrug off the woes that have hurt the rest of the industry. Though I’m a big fan of the Kansas City Southern deal and its potential to help CP live up to its full potential, it could take a few more years before the stock can return to a more upbeat track.
At the end of the day, the Canadian economy is at risk of falling into a recession. If it does, CP could have more room to the downside. That said, I expect CP could rebound very sharply if it turns out there’s nothing to fear about the recession than the fear itself.
At 21.89 times trailing price to earnings, CP stock looks like a great buy for young investors who are willing to ride out another tough year (or two) en route to its rebound. Nobody knows when the rebound will come, but I think it will be sharp, given CP’s wide moat and its unique, extensive network.
For now, collect the 0.78% dividend yield as wait for the name to return to the right set of tracks.
Rogers Communications
Rogers Communications (TSX: RCI.B) is a number-three player in the Canadian telecom scene, and it doesn’t get as much respect as its two bigger brothers do, probably because its dividend yield pales in comparison to its peers.
At writing, Rogers sports a yield of 3.46%. Why bother with such a modest yield when you can easily get north of 6% with one of its rivals? Not only do I view Rogers’s dividend as more “growthy,” but I think it’s stabler if things get really ugly next year. For now, pundits expect a somewhat soft landing. If worse comes to worst, though, dividend health will become of increasing importance.
For now, Rogers has one of the healthiest dividends in the space. As the company looks to invest in its impressive network, I expect shares could see the blue skies again far quicker than its peers. The stock recently surged 15% off its 52-week lows. I think it’s the start of a sustained move to much higher levels.
