Stock market corrections are a nerve-wracking experience for all new investors. Seeing share prices fall left, right, and center can set off alarm bells in even the most experienced investors. However, the truly seasoned investor knows that a recession can be their best friend.
A market correction makes high-quality companies with strong fundamentals and reliable dividend track records a bargain for investors. Opportunistic investors seeking undervalued stocks for their portfolios don’t wait for the dust to settle to scoop up shares of such companies.
The immediate benefit is the chance to lock in higher-than-usual-yielding dividends. The long-term benefit is all the wealth growth from long-term capital gains. Against this backdrop, here are four stocks to consider adding to your portfolio today.
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TC Energy
TC Energy (TSX: TRP) is a major player in the Canadian energy industry, offering an extensive network for energy producers to transport gas. Since it charges based on the volume of gas it transports, TRP stock is not affected too much by volatile commodity prices. TC Energy is also one of the few companies with such an extensive pipeline network.
In an industry where the barrier to entry is high, it is well-positioned to continue dominating a significant part of the market. TRP stock boasts a dividend growth streak spanning 24 years, proving its financial stability. As of this writing, it trades for $68.66 per share and boasts a 5% annualized dividend yield that it distributes monthly.
BCE
BCE Inc. (TSX: BCE) is a giant in the Canadian telecom sector, boasting around a third of the market share. One of the Big Three telecoms in the country, it runs a sizeable and defensive business that can continue generating strong cash flows during harsh market environments. High interest rates and a high debt have hurt its share price in recent weeks. However, that has led to inflation of its dividend yield.
As of this writing, BCE stock trades for $31.92 per share. Down by over 35% from its 52-week high, it boasts a 12.5% dividend yield. The company’s continued investments in its fibre and 5G networks will eventually pay off, ensuring long-term growth. The short-term headwinds might drive share prices lower, but it looks well-positioned to be a strong long-term bet for income and growth.
Enbridge
Enbridge Inc. (TSX: ENB) is another energy transportation and distribution company that services the Canadian energy sector. The $139.1 billion market capitalization company does more than transport natural gas across its network. It also transports various grades of crude oil across Canada and the US. Its natural gas pipelines also facilitate its natural gas utility operations.
Besides traditional energy products, ENB’s network also transports renewable energy. This diversification is helping the business reposition itself for a changing energy sector early on. It has over three decades of dividend growth under its belt, proving its resilience in harsh market environments. As of this writing, it trades for $63.87 per share and boasts a 5.9% dividend yield.
Canadian Imperial Bank of Commerce
Canadian Imperial Bank of Commerce (TSX: CM), also called CIBC, is a $78.3 billion market-cap giant in the Canadian financial sector. One of the Big Six Canadian Banks, CIBC is a staple for dividend investors for decades. It was the top performer among its peers last year, and continues to do better than them despite the recent downturn.
While macroeconomic factors might be hurting Canadian banks in the near term, CIBC is well-positioned to sustain its high-yielding dividends. As of this writing, CIBC stock trades for $83.04 per share and boasts a 4.7% dividend yield, which is much more generous than what its peers offer.
Foolish takeaway
Using any available contribution room in a Tax-Free Savings Account (TFSA) to hold such a self-directed portfolio can help you reap the benefits of capital gains and dividend income without incurring taxes on any of the returns. If you have yet to use the updated TFSA contribution room, you might want to consider using it to begin building such a portfolio.
