For Tax-Free Savings Account (TFSA) investors looking to shift gears from growth to income generation with their TFSAs, this piece will have a closer look at some of the names that could help move the needle.
So, whether you’re looking for monthly income (think real estate investment trusts and a wide range of Canadian exchange-traded funds) or are fine with a quarterly payout (most investors should be since I think it makes less sense to screen out investments based on something rather arbitrary, especially since you can divy up quarterly payments anyway), there are ample options to consider, especially on the TSX Index, which still has plenty of higher-yielding value options, at least on average, compared to the U.S. market.
Of course, with inflation running hot and oil prices moving all over the place, Canadian investors had better be prepared for a rate hike or two come the second half. In my view, the Bank of Canada can only hold off for so long before lingering inflation becomes too much to bear. If a pivot towards prioritizing price stability is in the cards, perhaps some of the value poised to thrive in a slightly higher-rate world could make a lot more sense.
In this piece, we’ll look at a few dividend stocks that I think could do well, regardless of how high rates or inflation look to climb from here.
Source: Getty Images
Sun Life Financial
The life insurance stocks have been on a remarkable rally in recent years. Shares of Sun Life Financial (TSX: SLF) are up close to 70% in two years. And while the stock chart suggests you missed the run, I still think there’s value to be had right here while earnings look to pick up steam and industry tailwinds remain, even as rates look to creep higher.
With a 3.2% dividend yield and a modest 21.6 times trailing price-to-earnings (P/E) multiple, which isn’t bad considering the improving fundamentals, I consider SLF stock to be a very intriguing play, especially as the firm looks to pick up growth in Asia. Is this the cheapest or most bountiful that SLF stock has ever been?
Most definitely not. But as the Asian growth engine acts as a driver while the firm continues its momentum well into a higher-rate world, that might actually be a good thing; I think it’s worth splurging on the name right here.
Cenovus Energy
Cenovus Energy (TSX: CVE) has more than doubled in the past year, and as oil rockets amid mounting geopolitical tensions, there’s a chance the name could be right back at all-time highs as it looks to break out shortly after a dip of around 18%.
The stock trades at 16.5 times trailing P/E to go with a 2.1% yield. It’s not the cheapest or most yield-rich energy producer out there, but if you’re looking for capital appreciation, I think the name is vastly misunderstood.
As earnings mount, expect to be spoiled as a shareholder via more share buybacks and dividend hikes. If anything, Cenovus’s payout might have the most room for growth from here as its cash flows look to swell at a pace that might catch investors by surprise. For the energy-light portfolios out there, CVE stock stands out as a growthier play than most other mature energy names.
