Dividend investors looking to give themselves a nice raise with high-yielding names may have the opportunity to do so before the Bank of Canada moves ahead with its next few rate cuts. Undoubtedly, the Bank of Canada may have a greater willingness to lower the bar on rates a bit. And as they do, there’s no telling where the yields (and share prices) of the dividend powerhouses will go.
With some yields on the higher end of the past-year range, longer-term investors looking to get more yield for a lower price of admission may wish to start putting new money to work this summer rather than waiting for the haze of tariff question marks to clear up.
At this juncture, there’s really no telling when President Trump will back down from tariffs. Who knows? The entirety of his term may hold the same magnitude of uncertainty when it comes to levies. In any case, I think there’s less reason to sit around with too much cash because, like it or not, you could be waiting around a lot longer than expected, with less (or even nothing) in the way of post-inflation returns.
In this piece, we’ll look at a pair of compelling dividend stocks that look too cheap.
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BCE
BCE (TSX: BCE) made headlines in recent weeks as it finally took its swollen dividend to the chopping block. I don’t know how many investors expected the more than 12% yield to remain, but the post-dividend-cut reaction suggested the cut was no surprise. Now that the cut is over, I think there’s finally room for some optimism.
While the new dividend yield, which currently sits at 5.95%, is now sustainable, well-covered, and even, dare I say it, “growthy,” I wouldn’t rush into the stock as shares don’t seem to be in a hurry to bottom out quite yet. At the time of this writing, shares of BCE are at depths not seen in more than a decade. And there may not be too much good news to get behind going into 2025’s end, especially if we’re dealt a recession.
Though I wouldn’t be against buying the stock at $29 and change per share, given the low beta (0.66), which entails a less correlated ride, I’d be much more comfortable buying shares on strength than on further weakness. Sure, you could miss out on a huge upside move, perhaps following a solid quarter. But given the magnitude of risks and negative momentum, I’d be fine not trying to be a hero with a name that’s made the bravest of dip-buyers lose money quickly.
As we found out in the past year, buying the dip in the name has not been the way to go. Averaging into a position over time, I believe, could continue to be the wise way to build a position in a hard-hit telecom titan that probably won’t be too quick to reverse course, given industry headwinds don’t seem like they’ll dissipate anytime soon.
TFI International
Up next, we have trucking firm TFI International (TSX: TFII), which is down just north of 45% from its highs. Undoubtedly, the tariff war has really been hitting the transport firm where it hurts most. And while Trump pulling back on tariffs could cause some timely relief, I’d be more inclined to ride the name out over time after the disastrous quarter dealt out in February that wiped out around two years’ worth of gains in a hurry.
At 19.1 times trailing price to earnings (P/E), with a 2.1% dividend yield, TFII stock stands out as a value play for investors willing to stomach more tariff risk in their portfolios. I think the trade war fears are now overblown beyond proportion at this point.
