Dividend stocks are a must-have in your portfolio, irrespective of your investing journey. Historically, dividend-paying stocks have outperformed non-dividend-paying companies with lower risk. Due to their consistent payouts, these companies are less prone to market volatility, thereby providing stability to your portfolios. Also, investors can reinvest the regular payouts to earn superior returns. Against this backdrop, let’s examine the following two Canadian dividend stocks, which are currently trading at a discount and offer excellent buying opportunities.
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Telus
Telus (TSX: T), one of the three primary telecommunication players in Canada, has witnessed strong buying this year, with its stock price rising by 19.5%. Falling interest rates, healthy first-quarter performance, and improving broader market conditions have boosted its stock price. Despite the recent increases, the company still trades at a discount of over 35% compared to its 2022 high. Additionally, its NTM (next 12 months) price-to-sales and NTM price-to-earnings multiples stand at attractive levels of 1.6 and 21.3, respectively.
Moreover, the demand for telecommunication services continues to rise amid the increased adoption of technological advancements, such as cloud computing and IoT technologies, as well as growth in remote working, learning, and shopping. Amidst growing demand, the company continues to expand its 5G and broadband infrastructure, with its 5G services now covering 87% of the Canadian population. The company has also planned to invest $70 billion over the next five years to grow and enhance its network infrastructure across Canada. Additionally, its bundled services are gaining traction, driving growth in its customer base.
Besides, its other growth segments, such as Telus Health and Telus Agriculture & Consumer Goods, are witnessing healthy growth. Amid its solid financials and healthy growth prospects, Telus management expects to raise its dividend by 3–8% annually through 2028. Considering its current forward dividend yield of 7.4%, discounted valuation, and healthy growth prospects, I believe Telus would be an excellent buy.
Canadian Natural Resources
Second on my list is Canadian Natural Resources (TSX: CNQ), a Canadian oil and natural gas producer that operates a diversified and balanced asset base. Its large, low-risk, and high-value reserves, along with effective and efficient operations, support a low WTI (West Texas Intermediate) crude breakeven price, thereby driving its profitability and cash flows. Supported by these healthy cash flows, the company has increased its dividends for the past 25 years at a 21% CAGR (compound annual growth rate). Its current quarterly payout of $0.5875/share translates into a forward dividend yield of 5.4%.
Moreover, CNQ is expanding its production capabilities and plans to invest $6 billion this year. Amid the strengthening of its production capabilities, the company’s management anticipates its total average production this year to come between 1,510 and 1,555 barrels of oil equivalent per day (BOE/d). The midpoint of the guidance represents a 12.5% increase from the previous year. The production growth could boost its financials, thereby supporting its future dividend payouts. Its financial position also looks healthy, with liquidity of $5.1 billion.
However, CNQ has been under pressure over the last few weeks, trading at a 17% discount compared to its 52-week high. The decline in oil prices has weighed on CNQ’s stock price. Easing geopolitical tensions following the announcement of a ceasefire by Israel and Iran, as well as increased production from OPEC+ (the Organization of the Petroleum Exporting Countries and its Allies), have dragged oil prices down. Amid the pullback, the company’s NTM price-to-earnings multiple stands at an attractive 14.6. Meanwhile, OPEC expects oil demand to rise this quarter, which could lead to a boost in oil prices. Considering all these factors, I believe CNQ would be an excellent buy at these levels.
