Inflation might not be as worrisome as it was during the post-lockdown reopening five years ago, but it’s still a major problem. When you consider the cumulative impact of inflation over these past five years, it becomes apparent that something must be done to get prices (especially food prices) back to or even below the 2% mark.
Of course, it might take an interest rate hike or two from the Bank of Canada to nudge inflation down. And the employment situation might not be able to absorb as many hikes as the U.S. could, especially following its own hot jobs figure. In any case, Canadian investors should be ready for more of the same as what remains of inflation looks to nudge higher again before it comes back down to earth. While I don’t see inflation rocketing much higher from current levels, I think that a 3.2% figure for May is just a tad on the concerning side.
Fortunately, there are many ways to help offset the pains that come with higher prices on a broad basket of goods. Dividends on defensive names might be the way to go, and in this piece, we’ll look at two names that I think could be worth a buy for those looking to dodge and weave past another couple of months of mildly heated inflation.
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Enbridge
I don’t think you can go wrong with shares of Enbridge (TSX:ENB), especially while the dividend yield is still above the 5% mark. Of course, I wish the name yielding 7% and traded at a far lower multiple than it used to in its more challenged days. With shares recently eclipsing new highs while breaking past the $76 per-share mark, ENB stock is no longer a value play; it’s a premium cash cow. But make no mistake, that 5.1% dividend yield is still incredibly bountiful in a market that pays less for far less growthy companies.
In my view, ENB stock remains a premium stock worth paying up for. And until its segments slow (I don’t see this happening, given AI data centre-driven demand for gas), I wouldn’t want to get in the way of the name, especially as it keeps rewarding patience with more of the same (nice dividend hikes).
Canadian Natural Resources
Canadian Natural Resources (TSX:CNQ) is another name that stands out as offering a nice payout (4.45% dividend yield at the time of this writing) at a reasonable price.
Of course, the stock is falling, now just a percentage point away from a bear market (down around 18.4%), and while oil prices could continue to move lower, I still think that the main reason to play CNQ is the relative value to be had in the energy giant as well as the impressive operating economics that allow the firm to rake in meaningful profits even at much lower oil prices.
The stock goes for 11.9 times trailing price-to-earnings, which is quite cheap for a firm that’s already had a chance to demonstrate its economies of scale. Combined with solid dividend growth and falling leverage, I’d be inclined to pound the table had it not been for the negative momentum behind the shares today. I think nibbling and buying more on further weakness is the play.
