TFSA investors shouldn’t be rattled by recent market volatility, which was brought on by hotter U.S. inflation data and jitters in the overheated tech plays. In this piece, we’ll concentrate on two dividend bargains right here in Canada.
As the Canadian dollar continues to retreat (something I believe could continue over the next year as the Bank of Canada considers cutting rates), get ready for a bit of shock should you decide to exchange your Canadian dollars for greenbacks. Though currency moves can be tough to predict over the medium term, I think investors have plenty of quality merchandise on the TSX to look to if they seek solid businesses at competitive prices.
Without further ado, let’s check out two intriguing dividend stocks that I view as bargains as we head towards the month of May. Enter dominant national mattress retailer Sleep Country Canada Holdings (TSX:ZZZ) and the iconic, more than century-old discretionary retailer Canadian Tire (TSX:CTC.A).
Both retail plays look to be trading at depressed levels but may have the capacity to punch well above their weight classes as Canada’s economy begins to heal from a rather turbulent and inflationary couple of years.
Sleep Country Canada Holdings
Up first, we have Sleep Country Canada, an overlooked retail stock that boasts a generous 3.45% dividend yield at the time of writing. The stock exploded higher as the market bottomed back in late October, eventually peaking at $30 and change and correcting to around $27 and change. With shares of the mattress retailer fresh off a swift correction, I think long-term investors seeking solid dividends and growth prospects should consider nibbling on the dip.
With a mere $932.8 million market cap, many investors are sure to be sleeping on Sleep Country stock. It’s just not a widely followed name, given its relatively small market cap. In any case, the dividend looks sound, and the mattress retail industry, I believe, could be in for a boom once Canada’s economy can rise up as inflation and interest rates gradually gravitate lower again.
Sure, ZZZ stock may be a choppy ride, but at 13.6 times trailing price to earnings (P/E), I’d stash the name on a watchlist if you’re looking for the Canadian economy comeback plays to cash in on for the next two to three years. For now, look for management to navigate what it describes as “industry challenges.”
Canadian Tire
Canadian Tire stock boasts a 5.5% dividend yield at the time of writing. That’s close to the highest I’ve seen it in since the depths of the 2020 stock market meltdown. Undoubtedly, the discretionary retailer has been wandering through some rough economic patches since peaking back in the midpoint of 2021. However, most of the macro headwinds, I think, have already been factored into the share price.
Yes, discretionary home goods are not hot sellers nowadays, with inflation working its course on our wallets. When the time comes, though, I expect Canadians will be quick to return to the iconic retailer for its ever-expanding line-up of exclusive brands and intriguing new gadgets that Canadians just have to try for themselves. In the meantime, a few more rough quarters could be in the cards, but eventually, I like the retail legend to bounce back when Canadian consumers have a bit more disposable income in their pockets.
