There are plenty of great dividend stocks that are going for reasonable, even cheap multiples in this red-hot market. And in this piece, I’ll share a few of the dividend payers that are on my watchlist as we head into the holiday season and the end of the year.
Undoubtedly, valuations have steadily crept higher across the board, but when it comes to these names, I still think there’s a strong argument that shares are underappreciated compared to their improving fundamentals and, perhaps more importantly, their impressive dividend growth prospects. Any way you look at it, the following names, I think, are stocks worthy of a potential dividend all-star team.
BCE
First up, we have those battered shares of BCE (TSX:BCE), which probably lost a lot of investor confidence (and, of course, dollars) when it reduced its dividend a while back. The good news is that the new dividend is on solid footing and it’s probably positioned to grow annually at a rate far above historical averages, especially once the worst of the headwinds comes to pass and BCE is able to jolt its margins and gain more market share in the competitive wireless and fibre scene.
After falling by nearly 3% on Wednesday, the recent relief rally gains enjoyed earlier in the month have now been largely wiped out. It’s been tough to catch a bottom in the $30 billion telecom titan, but I think the stock is worth watching closely, as it appears to be forming a bottom of sorts.
If we’re dealt more rate cuts and the firm expands its fibre and wireless infrastructure in a cost-controlled manner, I see a scenario where BCE stock can sustain gains again. Of course, it’s hard to tell the immediate next steps, especially as sales flatline and the firm looks to AI data centres as a potential area of growth, as the legacy media business continues to feel the heat.
Could getting more involved with AI help offset weakness in the legacy business?
I think it could. Either way, BCE stock looks like a deep-value bargain while it’s trading at 4.8 times trailing price to earnings (P/E), even though there are profitability pressures in the cards for the new year. With a nice 5.4% yield and already so much damage done to the stock, I think it’s time to start at least thinking about buying. Though I have no idea when the bottom will hit, I’ll be keeping tabs and tuning in on the name because I do think the comeback could be fierce when the time does come.
Enbridge
Enbridge (TSX:ENB) is another name to keep a close watch of as it continues to make new highs after spending much of the past half-decade in the penalty box, so to speak. Undoubtedly, the midstream energy titan has the wind at its back, and as it continues to find new growth projects to feed dividend growth, I wouldn’t be deterred by the seemingly “heated” stock price. There’s still value to be had here, at least in my view.
The stock goes for less than 22 times forward P/E to go with a nice 5.6% yield. Sure, you may have missed the boat to get a yield of more than 7% for a P/E in the teens. However, I still think current prices ($68-70) are a fair price to pay for a firm with all the tools to help ENB shares do better than the TSX Index while exhibiting a tad less volatility (0.82 beta, which implies less correlation to the broader market). Enbridge has come a long way, and it’s probably just getting started as its gas transmission business really starts to flex its muscles.
