There are plenty of intriguing contrarian plays out there to consider, and while the TSX Index is starting to look a bit frothy, it’s still not outrageously expensive, especially when you compare it side-by-side with the S&P 500 or the even pricier Nasdaq 100, the latter of which will soon gain exposure to Elon Musk’s (arguably overpriced) space company. Any way you look at it, the TSX Index looks like the value play for investors looking for more of a dividend focus at a lower cost.
With the Bank of Canada (BoC) on pause and the Federal Reserve’s new Fed chair, Kevin Warsh, emphasizing that inflation is a bit on the high side, it certainly feels like a hike in the U.S. is likelier than a cut.
Of course, nothing is a guarantee at this juncture when you consider how fast things can move regarding the employment picture and pricing. Perhaps the dip in oil prices could erode the odds of a rate hike south of the border. But, really, time will tell, and for Canadian investors, I think that domestic dividends could be the play going into the second half of 2026.
With a weak loonie (especially relative to the greenback) and perfectly good risk/reward propositions on this side of the border, I’d argue that it could make sense to forego the hot tech play in the U.S. while going for the proven, and still cheap, names on this side of the border.
Here are two names that I like for the second half of the year, and the summer season officially kicks off.
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Canadian Imperial Bank of Commerce
After a hot run in the Big Six Canadian bank stocks, questions linger about how the rally will end and how steep the decline will be. Are valuations a bit heated for the big banks after a glorious past two years’ worth of gains?
Certainly, but I’d argue that the rally is more than warranted, and while the value proposition and yields are relatively limited, I still think that it’s a mistake to bet against the big banks, especially as they make posting big quarterly beats a habit.
Canadian Imperial Bank of Commerce (TSX: CM) still looks like a name that could have more performance up its sleeve. Shares might not go for a single-digit price-to-earnings (P/E) ratio anymore, but we’re talking about a far more robust bank that has what it takes to keep the growth going strong. With tremendous earnings momentum and smart buybacks, I think that 16.2 times trailing P/E is a fair price to pay for an outstanding business. The only knock against the stock is the now compressed 2.62% yield. It’s half of what it was just a few years ago, and that’s just a bit discouraging
With the bank recently getting into private markets with its latest fund, I think that the future is bright for the nearly $150 billion behemoth that’s becoming a force, not only in Canada, but also south of the border. Of course, the U.S. business might not be huge, but over the next three to five years, look for the U.S. market to act as a new growth engine for a bank that’s proven itself as incredibly well-managed.
