The TSX Index may just be in a spot to outperform the S&P 500 and even the Dow Jones Industrial Average over the next decade as Canadian value plays look to have its moment to shine over mega-cap momentum stocks that have led us higher in recent years.
Indeed, the market will always move in unpredictable ways, but if you’re looking to position yourself with value in mind, I think neglected Canadian dividend stocks are a great option for investors.
In this piece, we’ll look at one extraordinary dividend deal on the TSX Index. While loading up may make sense today if you’re overweight on cash, I think that buying into full position over the next year makes the most sense for investors looking to take advantage of any market turbulence that could be on the way.
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Parkland Fuel: A smaller dividend play to buy on the way down
First up, we have $5.8 billion convenience retail firm Parkland Fuel (TSX: PKI), which has been accelerating lower in recent quarters, thanks in part to a few sub-par quarters and broader pressures working its way through the industry.
Undoubtedly, Parkland Fuel could be in asset-selling mode going into the new year as the firm seeks to shore up cash to pay down debts and continue funding its handsome dividend. At the time of writing, the dividend is quite generous, yielding 4.1%. Though asset sales could take a great deal away from the firm’s growth profile, I continue to view Parkland as a deep-value option and a compelling takeover target for industry consolidators.
A takeover may be less likely if Couche-Tard buys 7-Eleven
As Alimentation Couche-Tard (TSX: ATD) goes after a behemoth in 7-Eleven, the odds of a Parkland takeover seem incredibly low. After all, if Couche-Tard ultimately buys 7-Eleven, it will have a mountain of debt and limited resources to go after the smaller fish in the gas station and convenience store waters. Either way, I think Parkland can fare well on its own as it looks to explore more asset sales while looking to navigate ongoing industry headwinds going into the new year.
Recently, the firm noted its intent to sell some of its Florida locations in an effort to raise cash. I’m not so sure Parkland will get the best bang for its buck by selling in this climate. Either way, I view the stock as undervalued at 15.7 times trailing price to earnings (P/E).
Further, if Couche-Tard’s potential 7-Eleven deal falls through, perhaps Parkland Fuel could be the next best thing to consider as the convenience store giant looks to make a deal. Of course, Parkland is a small, bite-sized firm relative to 7-Eleven.
Either way, I wouldn’t give up on Parkland right here, as it gives up more of the gains it enjoyed through 2023. Catching a bottom could prove tough, though, so do be ready to add to a position on further weakness. Perhaps $30-31 could be a good spot to double down on shares if you already own a position.
