As the TSX Index looks to continue its bullish run, long-term investors may wish to pick up shares of their favourite dividend payers before the price of admission has a chance to rise even higher. Indeed, the Canadian stock market’s hot run could certainly kick into high gear as we exit one of the ugliest seasonal periods for the market.
Indeed, just because September is coming to a close does not mean investors should neglect the defensive parts of their portfolio. Arguably, the bout of July-September choppiness could carry into year’s end. In any case, this piece will check in on two impressive dividend stock picks that still look to be a tad on the undervalued side going into October.
Moreover, each name looks like a relatively stable bet for investors worried that another correction could be in the cards yet again. After such a prominent melt-up, investors should be a tad more cautious and insist on scoring stocks at relative discounts.
When it comes to cheap dividend stocks, the banks immediately come to mind. While many of them are chasing new all-time highs again, some are still attempting to lift themselves off the canvas after being pummelled over the past two-and-a-half years. While the bank stocks won’t be everyone’s cup of tea (they’ve been rather risky, choppy plays since the COVID pandemic began), I think they’re worth grabbing if you have a long-term horizon and seek to be paid a generous dividend for your time.
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Bank of Montreal
Bank of Montreal (TSX: BMO) is one of those Canadian banks that’s seen its U.S. business work against it of late. While the U.S. market stands out as a compelling source of long-term growth for Canadian banks, recent macro headwinds have really caused investors to send banks with U.S. exposure to the penalty box. After a pretty bad quarterly showing, BMO stock finds itself in limbo, stuck down around 20% from its all-time high not seen since the start of 2022.
Despite dragging its feet for just over two years, I view BMO stock as a top catch-up trade for investors looking to bank on the big banks by the end of the year. At writing, shares go for a modest 14.1 times trailing price to earnings (P/E). It’s not a massive bargain, but it’s also not too expensive, especially given the bounce-back potential and the fat 5.1% dividend yield.
Northland Power
Northland Power (TSX: NPI) is a top deep-value pick for investors eager to take advantage of the recent pullback in the green energy plays. Indeed, higher rates and political uncertainties have made for a rather uncomfortable ride.
Still, most of Northland’s woes can be and likely will be solved in the coming years. The company is on track to stick with its full-year guidance as a number of its projects move right along. Of course, offshore wind generation projects can be rather expensive.
However, as rates fall, I view Northland as one of the firms poised to catch a break. Today, the stock is off more than 53% from its high with a 5.12% dividend yield.
