The Canadian stock market has been steadily recovering, thanks in part to hopes for lower interest rates (the Bank of Canada to the rescue?), tailwinds in the technology sector, and some pretty decent numbers from some of the more resilient Canadian firms.
Of course, the big banks and telecom stocks continue to face headwinds. And though industry headwinds may not be so quick to dissipate in 2024, those enticed by their dividends shouldn’t be afraid to punch a ticket, as long as they’re willing to ride out what remains of the headwind hurricane facing these corners of the market.
I have no idea if lower rates will be enough to power shares of some of the most battered telecom (or bank) stocks higher. Regardless, their dividend yields have got to be intriguing if you’re a passive-income investor who’s looking to give yourself some sort of quarterly supplement!
As we move into April, investors may wish to start nibbling on some of the beaten-down dividend juggernauts, some of whom are at multi-year lows. But do remember, just because a stock is at lows not seen in many years does not mean a turnaround is coming or that further downside is not possible!
Averaging down when things are looking south
When it comes to stocks with strong negative momentum, incremental buying (call it dollar-cost averaging, if you will) makes a lot of sense. Let’s say you put a portion of a monthly paycheck to work on an ailing telecom stock like Telus (TSX:T).
If shares continue to fall, you’ll be able to lower your cost basis (or averaging down your invested principal) over time. Heck, you may even hope for T stock to fall further every month! Though dollar-cost averaging isn’t an optimal strategy, especially if you just so happen to catch the exact bottom in a stock (or somewhere close to it), I think it takes a lot of stress out of the equation for new investors who have high hopes from their new stock buys.
If you can remove some emotion from the equation, I think you can turn the tides ever so slightly in your favour! Acting on raw emotion, as a beginner, is often a very bad idea. Many tend to sell when they feel bad about a stock, thinking that they can only lose money in it, while others may be inclined to buy when it seems the good times (and stock price momentum) will never end.
BCE
BCE (TSX:BCE) has the heavier yield of the two telecom giants. After slipping another full 1% on Thursday’s session, the stock now goes for around $46, a far cry from its all-time high just shy of $74 per share! BCE stock may be a laggard, with a dividend that’s getter too fat to handle (8.58% yield), but if you seek a bargain in the wireless and cable scene, perhaps there’s value to be had in the name while it’s going for 15.1 times forward price to earnings.
The stock’s crashing, down nearly 38% from its peak, but if you’re comfortable averaging down, perhaps BCE may be worth inching into. If you liked the firm when it was going for more than $60, you should love it now!
Telus
Telus also freshly crashed, with a dividend that’s now at around 7%. Though I view Telus’s payout as slightly more sustainable, I can’t speak to the negative momentum. Shares could easily fall below $20 over the near term. So, incremental buying may be the way to go if you’re interested in building a position in the $32 billion firm.
I have no idea if Telus will prove a value trap right here. That’s why nibbling may be the best course of action. That way, you won’t be dreading T stocks falling into the high teens, and you may even relish the chance to buy more shares at lower lows!
Between BCE and T, I like the latter slightly better as its wireless business seems more enticing.
