When it comes to taking your portfolio to the next level, adding a few dividend (growth) stocks into the mix can really help solidify things, especially when volatility makes a furious return to the financial markets. Undoubtedly, there’s nothing wrong with betting big on the growth and tech plays.
However, you must be ready to sail through the rougher waters, and while the November rough patch seems to be over after three huge up days enjoyed by the S&P 500, along with similar strength on this side of the border, with the TSX Index now making fresh new all-time highs, investors certainly shouldn’t let their guard down.
Just a week ago, it felt like the AI bubble burst was unfolding, making those holding onto stocks seem reckless. Now that Canadian stocks are at new highs, I think it’s time to start looking towards a new set of leaders that could drive markets higher into year’s end and in 2026. While the AI stocks recovered considerable ground, many of the names are still down and out. And questions linger as to whether those harder-hit AI innovators will be so quick to recover.
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Enhance your portfolio with bargain buys?
As of this writing, they’re not nearly as quick to recover alongside the rest of the market, with lower-tech steady dividend payers recently experiencing a rush of strength. The big question new investors should ask themselves is whether this is the start of a broader rotation out of the risky assets and into lower-beta stocks, preferably with higher dividend yields and consistent dividend growth prospects.
As risks rise into the new year, I personally think that some of the neglected dividend juggernauts deserve to be picked up right here. And in this piece, we’ll look at two names that look beyond undervalued.
Telus
Telus (TSX: T) shares have been so incredibly painful to hold on the way down. With the yield now at 9.2%, which is the highest I’ve ever seen it, I think there’s some serious doubt that the payout will survive this historic slump. With various market commentators criticizing the firm for raising its dividend amid unprecedented pressures and challenges, questions linger over whether last year’s dividend increase will be followed by a steep reduction in the near future.
There’s still time for Telus to turn the tables, but the time is ticking. And if no earnings surprises are dealt within the next quarter, things are bound to look bleaker for the dividend. Of course, there’s a non-zero chance that Telus’ 9.2% yield survives and the stock rallies furiously next year, perhaps if the firm can find a way to ramp up its market share gains in the telecom scene.
While I am a tad more optimistic about the dividend policy, I acknowledge that the risk of a cut has risen sharply. And it will continue to do so every leg lower. So, do be careful if you’re an income investor who can’t stomach a cut within two years.
Just a few years ago, when the pipeline giants were down and out, and yields were through the roof, I’m sure many ditched them, thinking the dividend would be slashed.
As it turned out, staying the course was the right move. And while there’s not much clarity into where Telus goes from here as it nosedives, I think holding on could prove wise. If you believe in the strategy and doubt the skeptics claiming the dividend is overdue for the chopping block, perhaps nibbling more shares at under $18 per share could be the smart move.
