Dividend yields from across the board have, on average, come in. With a red-hot TSX Index gaining ground, the significant share price appreciation in a number of names has caused pressure on yields. And while your average dividend stock may be yielding some basis points less than just a few weeks or months ago, I do think that investors shouldn’t shy away from some of the high-yielding names that are taking steps to ensure their payouts are on stable footing.
More encouragingly, their path forward may help them further support dividend growth over time. In this piece, we’ll look at two names that have towering yields which, believe it or not, actually look destined to stay intact. Arguably, they’re safe dividends that I’d bet will grow further rather than retreat. Of course, if an economic recession is around the corner, all bets are off.
In any case, I’ll go ahead and say I like the value proposition in the following dividend stocks and believe that it’s incredibly unfair to judge them as dividend cuts just waiting to happen when there are more than a handful of scenarios where shares (and the dividend) can gain over the next two to three years. So, if you’re a new long-term investor who wants more yield, but is keen on solid balance sheets and recovery narratives worth getting behind, consider the following pair this September:
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Telus
I know I’ve been pounding the table on shares of Telus (TSX:T) for most of the Spring and Summer. And while it’s clear that most “safe dividend” seekers have moved on after the telecom stock’s near-43% peak-to-trough fall from grace, I do think that there’s no sense in paying too much attention to the five-year chart when there are many things that I think could be conducive to a far better-looking chart come 10 years from now.
Of course, not every investor has the desire to own a stock for a decade. In fact, some momentum chasers may not wish to hang onto a stock for more than a month! In any case, I think there’s serious value to be had in T shares. The yield is 7.2% and it’s not about to be sliced anytime soon. In fact, I’d argue that more single-digit percentage growth is to be expected next year as Telus looks to stand out from the pack. Make no mistake, the telecom industry is tough to thrive in.
But Telus has what it takes to do well, even as the battle for wireless customers gets even tougher. With not much in the way of expectations (some see Telus retaining its market share in wireless), I do view the name as a potential gainer if the firm can prove that it can still, in fact, take share.
How so in a commoditized market that’s seen downward pressure on data prices?
Network quality and value for money are what will help a telecom gain significant share, a pretty simple strategy, at least on paper.
With a few perks sprinkled in and investments in customer service (Telus used to be a standout in the quality of customer care and, in many ways, it still is, but there’s room to improve), I do believe Telus has what it takes to outgrow the competition. Sure, it’s playing defence, in a way, given its leadership. But I’d not sleep on the name as it looks to level up its growth and perhaps its dividend.
Also, technically speaking, the name looks intriguing going into the fourth quarter. But, of course, T stock is a name to buy and hold for the dividend payments, rather than the near-term gains potential.
