There are still big, low-cost dividends out there that might just allow one to achieve a solid return for the year ahead. Undoubtedly, we’ve heard a lot of concerns about the sustainability of this latest bullish upswing.
From artificial intelligence (AI) bubble-bursting fears to above-average valuation metrics (think the price-to-earnings (P/E) ratio), and all the sort, it’s not easy to be a new investor with ample cash to put to work. Over the past couple of years, we’ve heard a lot of alarmists talking about the 2000 dot-com bust and how the current environment, led by AI stocks, is comparable. In fact, many pundits might be bracing for a massive downswing at some point down the road.
For a new investor, these crashes are worth knowing about, but don’t let them scare you to the sidelines or into an overly cautious mindset. Young investors should take smart risks for a shot at better results over the long haul. In any case, there’s no denying the above-average market multiples, especially on the indices south of the border.
Though I wouldn’t be backing up the truck on something like the S&P 500 at these levels, especially with Fed chairman Jerome Powell himself coming out and commenting on “fairly” high market valuations.
Probably not. However, the “correction” to the froth doesn’t have to be painful. Indeed, stocks could stay range-bound for quite some time. Additionally, the TSX Index still looks incredibly cheap at this juncture, even after a run that’s made the S&P 500’s surge look relatively muted.
In any case, I think dividend stocks are where the value lies today. And if markets do head for a valuation reset, I think they’ll be mostly spared on the way down. Here are two names that I think are great buys right now.
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Nutrien
Nutrien (TSX: NTR) is an agricultural commodity producer that’s been in a tough spot for many years now. While the bear market still seems to be in control, with shares of NTR still off close to 40% from their 2022 highs, I think the past year of gains is worth getting behind. The stock is up around 26% year to date, and while fertilizer prices aren’t exactly exploding higher, I do think that longer-term tailwinds and improved operating economics work in favour of Nutrien.
With strong profit guidance following its latest number and the potential for potash prices to power higher into 2026, I’d not sleep on the 3.85%-yielder while it’s still trading at 11.3 times forward P/E. That’s way too cheap for such a wide-moat commodity play that might have what it takes to hold up come the next market correction.
Scotiabank
Scotiabank (TSX: BNS) is another dividend payer that’s having a nice breakout year. The big bank is up over 15% year to date, thanks in part to a stellar quarterly result. With more room to run versus its hotter peers and a promising long-term growth narrative powered by its international banking business, I’d be inclined to be a buyer at 11.3 times forward P/E (coincidentally, the same as NTR).
With a secure and growing 4.94% dividend yield, I’d stick with the name as the Big Six continue their comeback. As one of the major banks that hasn’t yet reached new highs, I’d look to the internationally focused $110 billion bank as a catch-up trade of sorts going into the year’s end.
