Hold Your Horses: 3 Canadian Stocks to Watch for a Dip

IGM Financial (TSX:IGM) and two other Canadian stocks have neither a strong buy nor a strong sell signal right now.

| More on:

With a mix of earnings slowdowns, rising share prices, and negative outlooks, the “hold signal” list for stocks on the TSX index contains enough reasons to stay on the fence. However, at a casual glance, there may seem to be a lot of great stocks on that list that ought to be snapped up right away: take that low P/E or attractive dividend, that high growth or low debt, for instance.

But all is not as it seems: scratch the surface, and the data may tell you a different story, as the breakdowns for the following illustrative stocks will show.

IGM Financial (TSX:IGM)

Attractive valuation (see a P/E of 12.5 times earnings for instance) and a trailing dividend yield of 6.79% may make IGM Financial a sure thing. However, that valuation falls down on a P/B of 1.8 times book and some negative earnings data: IGM Financial saw it one-year past earnings shrink by 18.6%, while overall its five-year average shrank by 3.5%.

A past contraction in earnings that corresponds with a rising share price (it’s been on the up since the start of the year) backs up a hold signal consensus. Some of the data for IGM Financial is borderline in its nature: look at a debt level of 41% of net worth that just about grazes the significant threshold of 40%, while a 6.1% expected annual growth in earnings is not significant by TSX index standards.

Goldcorp (TSX:G)(NYSE:GG)

One of the best gold stocks on the TSX index, today Goldcorp is looking like one to watch for a dip. With a mixed range of market fundamentals, from a high P/E of 117.4 times earnings to a low P/B of 0.6 times book, this growth stock pays a small dividend yield of 0.77%. That’s not high enough to satisfy most passive income investors; while momentum investors may be interested in Goldcorp for the upside, though a beta of 1.22 relative to the market might not signify sufficient volatility.

Insiders have been selling over the last three months, which is something that potential investors may want to know about if they place importance on inner-circle confidence. However, the share price is starting to gradually recover after last September’s nosedive, so if value investors want to get in on a 53.1% expected annual growth in earnings, they may have to make a snap decision.

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM)

With a share price that’s still rising since December’s sharp drop-off, Canadian Imperial Bank of Commerce isn’t necessarily poor value – with a P/E of 9.4 times earnings and P/B of 1.5 times book, it’s priced fairly evenly. Rather, an expected 4% annual growth in earnings over the next one to three years does not represent a significant increase, and it doesn’t pair well with a steadily rising cost to buy. All told, this is a top banking stock to watch for a dip.

The bottom line

TSX index investors may want to hold off on the above stocks for now and add them to a wish list of tickers to come back to once their share prices have stalled. A dividend yield of 4.96% and technical discount by 24% compared to its future cash flow value makes Canadian Imperial Bank of Commerce the closest stock on this list to a moderate buy, while most gold stocks look set to have their time in the sun in 2019.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Victoria Hetherington has no position in any of the stocks mentioned.

More on Dividend Stocks

Train cars pass over trestle bridge in the mountains
Dividend Stocks

Is CNR Stock a Buy, Sell, or Hold for 2025?

Can CNR stock continue its long-term outperformance into 2025 and beyond? Let's explore whether now is a good time to…

Read more »

coins jump into piggy bank
Dividend Stocks

The Smartest Dividend Stocks to Buy With $500 Right Now

These top dividend stocks both offer attractive yields and trade off their highs, making them two of the best to…

Read more »

Middle aged man drinks coffee
Dividend Stocks

Here’s the Average TFSA Balance at Age 35 in Canada

At age 35, it might not seem like you need to be thinking about your future cash flow. But ideally,…

Read more »

ETF stands for Exchange Traded Fund
Dividend Stocks

How to Invest Your $7,000 TFSA Contribution in 2024

Here's how I would prioritize a $7,000 TFSA contribution for growth and income.

Read more »

a man relaxes with his feet on a pile of books
Dividend Stocks

CPP Pensioners: Watch for These Important Updates

The CPP is an excellent tool for retirees, but be sure to stay on top of important updates like these.

Read more »

Technology
Dividend Stocks

TFSA Investors: 3 Dividend Stocks I’d Buy and Hold Forever

These TSX dividend stocks are likely to help TFSA investors earn steady and growing passive income for decades.

Read more »

four people hold happy emoji masks
Dividend Stocks

Love Dividend Growth? Check Out These 2 Income-Boosting Stocks

National Bank of Canada (TSX:NA) and another Canadian dividend-growth stock are looking like a bargain going into December 2024.

Read more »

An investor uses a tablet
Dividend Stocks

A Dividend Giant I’d Buy Over Enbridge Stock Right Now

Enbridge stock may seem like the best of the best in terms of dividends, but honestly this one is far…

Read more »