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September usually means the stock market gets bumped from its summer slumber. 2024 continues to be a solid year for North American markets, and there’s reason to believe the balance of the year is going to be dominated by interest rate action and U.S. presidential … stuff.
Two areas of the market that we continue to view as under-appreciated are all things small-cap as well as dividend-paying companies. To get this fourth quarter rolling, we have five hand-picked stocks that certainly play in those areas. We’re of the opinion that each of these companies will serve as a fine vehicle to allocate and grow your hard-earned savings.
Foolishly yours,
Iain Butler, CFA
Advisor, Stock Advisor Canada
“Best Buys Now” Pick #1:
Gibson Energy (TSX: GEI)
If you’re unfamiliar with this stock, Gibson Energy (TSX: GEI) owns critical infrastructure used to transport liquids for Canada’s oil and gas industry.
A promising development in mid-July was the extension of a long-term contract with an investment-grade global E&P company at Gibson’s Gateway Terminal in Texas. This was a good thing because contract renewals at Gateway have been a question mark hanging over Gibson’s stock price. However, we’d be surprised if this renewal process doesn’t go to the company’s liking.
It’s this lingering uncertainty, however, that gives us this investing opportunity. To better define it with a number, Gibson’s fully covered dividend yield of 7.2% suggests market skepticism, and we’re happy to take the other side. After all, locking in that yield and a dividend stream that has grown steadily over time is likely to come close to a market-topping return all on its own.
Another angle to this situation is that dividend-paying stocks are very likely to benefit as Bank of Canada rate cuts continue, especially if the Fed finally shows up to the rate-cut party. For investors, buying a supported >7% dividend yield that goes along with a business that has growth potential is certainly more attractive than earning a declining rate in a cash account as interest rates fall. Gibson and many other stocks may stand to benefit from a substantial flow of investor funds if North American central banks play nice.
Gibson Energy is a well-run company that owns important energy infrastructure, and there’s an interest rate kicker to boot. We’re of the mind the market doesn’t appreciate any of this as much as it should … yet.
