Dividend stocks help keep you compensated while your investment thesis plays out. Sometimes when you invest, it takes time for a company to roll out a new product/service, integrate a new acquisition, or accomplish a turnaround plan. You know the business has the capability to do it, but it is just taking time.
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Dividends help balance out returns
Sometimes a short-term event causes an unexpected sell-off, but the long-term fundamentals remain good for the business. The point is that there can be many reasons why your stock’s value is not immediately rocketing up. That is just part of investing.
Dividends can help smooth out the ride. You get to receive a tangible cash reward while you wait for the stock to deliver gains. If you want some dividend stocks that pay you to wait for some nice capital upside, here are two to consider today.
Tourmaline: A dividend stock with long-term catalysts
Tourmaline Oil (TSX: TOU) is a high quality Canadian energy stock. However, its stock is having an abysmal year. It is Canada’s largest natural gas producer. Natural gas prices have been very, very weak. Its stock is down 10.7% year to date.
Yet, things could be looking up from here. Low natural gas prices are largely due to several near-term and one-off challenges like major pipeline maintenance and warm fall weather. Colder weather is coming, pipelines are resuming service, and LNG Canada is coming online. All these factors should help demand recover and push Alberta natural gas prices up.
Regardless, Tourmaline sells to a wide mix of markets, including high-priced markets in California and LNG terminals on the Gulf Coast. The company has a seven-year plan to significantly grow production. It will be costly in the near term but will unlock substantial efficiencies, margins, and free cash flow.
Tourmaline pays a modest 3.4% base dividend yield right now. However, it has been pumping out special dividends that put its total yield over 5%. Collect those dividends while Tourmaline continues its journey as a top-three natural gas producer in North America.
Dream Industrial: A value-priced dividend stock with a nice yield
Dream Industrial Real Estate Investment Trust (TSX: DIR.UN) is a great dividend stock if you want monthly income. It pays a $0.05833 per share monthly distribution that equals a 5.8% yield annualized.
The REIT is one of the largest industrial landlords listed on the TSX. The REIT is intriguing because a large portion of its portfolio is leased at lower than market rents. On turnover or renewals, it has a long opportunity to bring rents up to market. That could provide years of organic growth.
Interest rates are coming down, so that will also help on the margin side. In the meantime, this stock is still cheap compared to other industrial peers in the U.S. and its private market value. Grab its chunky monthly dividend while you wait for its valuation to revert upwards.
The Foolish takeaway
If you are a value investor, you can be waiting a while for a stock to reach its true value. It is nice to collect a steady stream of income while you wait for that to happen. Stocks like Tourmaline and Dream are great opportunities to collect a nice income stream and wait for these stocks to rebound.
