As the broad markets experience a bit of a turbulent period, investors may wish to put together a list of stocks they’d be willing to scoop up on the way down. With the TSX Index looking considerably cheaper than the S&P 500, with more in the way of generous higher-yielders, perhaps the case for buying the best-in-class dividend payers on weakness makes the most sense.
When the share price moves lower, the yield tends to move higher. And with a preference for larger-cap firms with well-covered dividends and a long history of annual raises, investors willing to put money to work on the way down might be able to turn something that’s feared and dreaded into an opportunity to get more value (and dividends) for one’s dollar.
Of late, the elephant in the room has to be that sudden spike in oil prices. Whether or not we’ve reached the peak in the price of oil, though, remains the big question. Given how sudden and violent the surge in oil was, it should be no surprise to witness some folks talking about the potential for US$150 per barrel of WTI (West Texas Intermediate) or even an unprecedented US$200.
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Stagflationary fears? You’re not alone!
Either way, higher oil prices and fears of a potential stagflationary shock could be a major risk for investors as we progress through the year. With inflation as hot as it is (especially for food), and the potential for energy prices to reverse all of the disinflation we’ve seen with gas, it seems like a smart time to think about how one can manage through another inflationary period.
Given that the latest job numbers also look quite rough, perhaps stagflation isn’t out of the equation. At the end of the day, economic bumps and inflationary shocks can happen, and it’s important for investors to understand the potential impact on their TFSA portfolio.
At this juncture, I think diversification is a smart move, perhaps with a greater focus on durable, growthy dividends. In this piece, I’ll share a dividend dynamo that I think might be worth picking up on the latest dip.
Bank of Nova Scotia
The bank stocks have been scorching hot in the past year, but things have since cooled, with Bank of Nova Scotia (TSX: BNS) shares plunging by nearly 10%, thanks in part to a quarterly result that certainly wasn’t the best of the Big Six.
Despite the recent pullback, though, I wouldn’t yet hit the panic button, even if some sell-side analysts are ready to move from overweight to equal-weight (that’s pretty much buy to hold). Undoubtedly, credit loss provisions are a main worry again, and while they’re never ideal, the big bank has what it takes to manage through.
With Bank of Nova Scotia spending a good chunk of change on AI tech efforts, I do think substantial cost savings might not be all too far off. Sure, AI spend is getting punished nowadays, but I think long-term investors should actually be rewarding such strategic bets.
In any case, Bank of Nova Scotia recognizes the opportunities at hand, and that’s why I’d stay the course, even as shares have more room to come in further after an incredible year of outsized gains. Perhaps the big reason to stick with the name is the growth potential beyond Canada.
Whether that’s the foray into the U.S. market or the longer-term potential in Latin America, BNS stock stands out as a great internationally-focused bank pick, and one that has a powerful dividend. The 4.6% dividend yield looks to be ripe for picking, especially since shares are looking cheap again at 11.9 times forward price-to-earnings (P/E).
