Get ready for more volatility as the month of September approaches. Of course, there’s no guarantee that stocks will get choppier and toppier from here, but, in my view, I do think that investors can be ready for increased turbulence, especially for investors who are too heavy on risk after a relatively rewarding and smooth (unless you’re in AI stocks) past couple of months.
While September could be another big up month for markets, I also wouldn’t neglect the Canadian dividend plays that aren’t tied to the AI trade. It’s these names that could fare well for a change, especially as turbulence hitting the semis looks to cause selling and perhaps a bit of rotation.
For the most part, dividend yields have compressed. Whether it’s via all that capital appreciation (that’s the case of the big banks, pipelines, and insurers, which comprise a huge chunk of the TSX Index), or a few dividend reductions from the likes of telecom titans whose names I won’t mention, there are a lot of factors pulling down that upfront yield.
For dividend-growth investors looking for total returns and long-term dividend appreciation, though, I think September is as good a time as any to start putting a bit more cash to work while dividend deals still exist.
From safest to choppiest, let’s look at a pair of names worth stashing on the radar as summer turns to fall and the market looks to encounter a bit of turbulence.
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Restaurant Brands International
Restaurant Brands International (TSX: QSR) has a 3.3% yield and might even be a safer haven than the big banks, especially as investors consider the next path after earnings. With a 3.3% yield and a swift 4.2% drop after failing to meaningfully break out for summer, I think there’s another shot for new investors to buy.
At 19.6 times trailing price-to-earnings (P/E), the stock looks way too cheap, especially considering QSR is effectively one of the big winners amid the fast-food value wars. I think it has more wins in the books as investors rediscover the value of Burger King and Tim Hortons. The 0.53 beta also makes for a less-correlated name for dividend investors who are too heavy in the broad market averages.
Enbridge
Whenever Enbridge (TSX: ENB) stock dips into a correction, I think dividend growth investors have to hold their nose and hit the buy button. It’s a premier midstream energy play that has many years’ worth of dividend increases left in the tank, as well as longer-term expansion opportunities that I think investors are giving less weight to, just because of a few near-term worries. The stock is down nearly 14% from its high and boasts a nice 5.6% dividend yield. It’s well-covered, and it’ll probably just keep growing, even if the stock stays stuck for some while longer.
In my view, ENB stock is a terrific option for investors who want just a bit more yield but are willing to deal with the added choppiness. At the very least, shares are less correlated (0.79 beta) to a wobbly market that moves more on action in the big banks and the energy producers.
