As the software and tech scenes continue to plunge lower, many investors seem to be looking for steadier, even boring, places to rotate the cash. Undoubtedly, the so-called value plays, many of which pay nice dividends, seem to be getting their moment after years of sitting in the backseat as the tech darlings captured the hearts of investors.
While nobody knows how much longer the neglected, lower-cost sectors of the market will shine as the growth plays of yester-year look lower, I think that long-term investors should be cautious about which “safety” stocks they look to buy right here, especially since the indiscriminate selling in tech and software seems to have caused considerable buying in just about anything that’s within a sector deemed as safe. Undoubtedly, even safer, low-beta assets can drag their feet and correct lower. That’s why investors should have a preference for the value plays that are still discounted.
In this piece, we’ll look at two cheaper Canadian stocks with steady payouts that might still be going for a nice discount, even after recent gains in the staples and utilities.
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Nutrien
It’s time to give Nutrien (TSX: NTR) shares another look now that it’s up more than 32% in a year. The agricultural commodity producer boasts an impressive 3.1% dividend yield. What’s more enticing, though, is the 11.85 times forward price-to-earnings (P/E) multiple.
Of course, Nutrien stock’s rebound has been many years in the making, and as one of those cyclical plays that’s better bought on the way up rather than the way lower, I’m inclined to view the leading fertilizer producer as a fantastic pick. Just because shares have momentum behind them does not mean shares are no longer a great value.
With a solid quarter in the books, secular tailwinds that could power long-term demand, and the potential for further efficiency gains, I couldn’t be more enthused by NTR stock, even though the latest spike might pave the way for a near-term pullback.
Magna International
Magna International (TSX: MG) is another cyclical that’s looking higher in recent months. The auto-parts maker spiked after clocking in an incredible quarterly earnings result that seems to suggest the tides are finally turning. While the name is no longer a steal of a bargain, I still see value, and with newfound momentum behind the stock, I’m inclined to think shares are even timelier.
The 3.0% dividend yield is still incredibly rewarding. And with a nice guide for higher profits this year, I wouldn’t be surprised if investors were to be treated with more dividend growth. At the end of the day, it’s hard to stop the auto-parts maker once it gets the wheels turning.
After a blowout result and an encouraging guide for the rest of the year, I think there’s never been a better time to get back in, especially after slipping mildly (around 6%) from the 52-week peak. Finally, at 8.35 times forward P/E, I’d argue there’s still a case for Magna being a deep-value play. Either way, the name is a bargain, especially as margins march higher while electric vehicle-related contracts look to power steady sales.
I don’t know about you, but the fundamental improvements and encouraging path ahead, I believe, make Magna the best value it’s been in quite a while, even if it means paying a much higher price than a year ago.
