Whether tech stocks regain their highs or trend lower, TFSA investors should look at some of the top Canadian dividend stalwarts, even if they’ve been ice-cold in a red-hot market. Indeed, when the tables do turn and the market turns against tech, the steady dividend payers will probably be fine watching most of the carnage from the sidelines.
Indeed, if there is a bit of frothiness in the tech scene or the stock market as a whole, the low-cost, underperforming dividend stalwarts may be what helps investors navigate what could be another growth-to-value rotation, one that may very well happen in 2026 after three straight years of impressive gains.
With the S&P 500 up around 9% on the year while the TSX Index is up just shy of 12%, there’s a good chance that the S&P 500 will score a “hat trick” of three straight years of 20% gains or more. It’s unprecedented, to say the least, but has a real chance of happening if stocks can maintain their momentum into year’s end. Of course, tech earnings season needs to impress for the feat to be achieved.
Personally, I wouldn’t get my hopes up, as three straight years of incredible gains may very well follow a period of less-than-stellar results. And while the last bear market set the stage for such a run, I do think that the latest bullish surge may also set the stage for a return of the bear.
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Don’t fear the bear. Get ready for it!
Bear markets have been on the minds of many. And while “getting out” before the plunge seems like a good idea, new investors will discover that it’s not so simple to time one’s exit from markets.
Personally, I think being ready with defensive value names that can do well, even in turbulent markets, is worth pursuing, especially as the herd swarms around the next hot IPO, whether it be Databricks or something else.
Between AI IPOs and plain Canadian dividend stalwarts, I’ll go with the latter at these levels, even though I do acknowledge that such names won’t be in for a quick doubling as some red-hot AI stocks may still have some positive developments up their sleeves despite hefty valuations and a lack of profits to show for big AI spend.
Royal Bank of Canada
Royal Bank of Canada (TSX:RY) is a $266 billion banking behemoth that’s worthy of a spot in one’s TFSA. Undoubtedly, after the latest run in big bank stocks, shares now yield just 3.3%. Indeed, that’s modest for a bank, especially compared to where yields stood just two years ago.
In any case, GIC (guaranteed investment certificate) rates are down, as are rates on various high-interest savings accounts, making bank yields that much more tempting. And while RY stock is pricier today (15.1 times trailing price-to-earnings) with a compressed dividend (it wasn’t too long ago that shares of RY yielded north of 4%), I still think paying a higher price for less yield makes sense in this environment, especially if you’re looking for a firm that has such strong tailwinds at its back.
As the company continues to digitize while exploring potential gains from AI, it’s hard to throw in the towel at these heights. Combined with its profoundly strong capital position (its CET1 ratio is high enough to withstand even a catastrophic recession scenario), RY stock appears to be one of the firms that’s still swimming with its trunks on. So, even if the tide goes out, Royal Bank won’t be in as bad a spot as some other firms.
