Passive-income investors might find that yields, at least on average, aren’t as bountiful as they were a few years ago. Combined with less generous Guaranteed Investment Certificate rates and lukewarm yields on various bond exchange-traded funds (ETFs) or other funds, it might feel a bit more tempting to reach for yield with either pricier investment products (think the covered call ETFs) or with distressed dividend stocks that only have swollen yields because of an implosion in the share price.
While buying multi-year dips might not be the key to locking in a huge yield while riding your way back to decent capital gains, I think that there are opportunities with misunderstood dividend plays that much of the market is overlooking for some reason or another.
Enter shares of Thomson Reuters (TSX:TRI), a fallen media and software play that’s been on the receiving end of the recent software sell-off. After tanking close to 50% in the past year, the iconic Canadian stock now yields 2.61%.
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Thomson Reuters is an AI innovator with a juicy payout
That’s close to twice what it normally is. And if the selling isn’t yet over quite yet (it’s tough to tell when imploded stocks bottom out), there might be a chance to buy shares of TRI with a 3% yield. Either way, the name stands out as a win-win for value investors seeking a good dose of income on the side. With a dollar-cost averaging (DCA) strategy, you can punch your ticket at a nearly 50% discount while also leaving the door wide open to pick up shares with a 3% yield should another slip be in the cards.
For the most part, I think there’s a good chance that either scenario could happen in the near term. However, for long-term investors, I think that today’s entry point looks quite favourable. It’s not all too often you can get shares of an AI innovator to go with a yield north of the 2% mark.
In case you missed it, Anthropic’s AI legal tool is causing investors to ditch the potentially disrupted firms, like Thomson Reuters. But investors seem to be overreacting to the release of the tool. Not only does Thomson Reuters have terrific AI innovations behind the scenes (the firm recently acquired an AI startup called Noetica), but it also has the data.
Thomson Reuters is confident in its own AI agent, and it’s buying back shares
Thomson Reuters’s CoCounsel AI isn’t going down without a fight. And while Anthropic’s tool shows promise, I’d be inclined to give CoCounsel the edge, given its agentic abilities and track record operating within an ecosystem built on trust.
With management recently announcing plans to buy around $600 million worth of shares, it seems like insiders see the recent AI sell-off as more of an opportunity than anything else. I think they’ll be proven right once the AI fears settle and investors look to go bottom-fishing in the hardest hit software names. With the firm hiking its quarterly dividend by a generous 10% following its latest (fourth) quarter, I couldn’t be more bullish on the name, even as investors sell over the magnitude of uncertainty.
