Broader stock markets took a sigh of relief on Monday, as investors await the U.S. Fed’s next big decision. Indeed, the U.S. regional banking scare caught many by surprise. With a data-dependent Fed ready to continue its fight against inflation, the million-dollar question remains whether the U.S. banking sector’s weak legs are enough to justify some sort of pause, at least over the nearer term.
Tune into any financial television show and you’re likely to hear opinions on what the Fed will do next. Whether the Fed hikes 25 bps, 50 bps, or 0 bps, long-term investors don’t need to make too much of the matter. At the end of the day, how much the Fed hikes will mean less in the grander scheme of things if you are, in fact, a long-term investor and not a trader.
Arguably, a slower pace of rate hikes (or a lack of one in March) could induce a bit more investor anxiety. If it does, I think investors should view any excessively negative market action as more of an opportunity and less of a red flag. Indeed, long-term investors can afford to be more opportunistic when events swing markets wildly in both directions.
In this piece, we’ll check out two dividend stocks that are at fresh 52-week lows. If coming Fed data and banking sector volatility continue to weigh down markets, I’d not hesitate to average down as shares continue their tumble.
Long-term investors know that bull markets are born after the bear has worked its course. As dividend duds sink further into the abyss, their yields will swell, and could draw the attention of income-oriented investors seeking the best of both worlds: capital gains and dividend (growth).
Currently, Telus (TSX:T) and Nutrien (TSX:NTR) look intriguing.
Telus
Telus is a well-run telecom titan whose shares recently flirted with 52-week lows of $26 and change per share. Monday’s bullish session gave the name lift, but there’s still a long way to go if Telus stock is to return to new heights. The stock is down around 20% from its peak. And I do think this peak can be hit within the next two years, even with a recession on the horizon.
At the end of the day, Telus is a growth-driven telecom that’s ready to capitalize on the Canadian 5G boom. A recession could slow the pace of the boom. But longer term, I still think Telus represents one of the best income growth opportunities on the TSX. Whether or not the Fed slows its fight against inflation, Telus is a great pick-up while its yield is around 5.3%. That’s considerably more yield than you’d get historically. And this payout can help you fight off lingering inflation.
My takeaway? Be ready to pounce if markets slip again on the back of Fed news.
Nutrien
Nutrien is a top dog in 2022 that slowed down in recent quarters. The stock’s off around 28% from its 2022 high. Undoubtedly, high fertilizer prices will not last forever. And though the best quarters are in the rear-view, there’s still room for Nutrien to continue delivering historically impressive quarters.
At 5.1 times trailing price-to-earnings, I’d argue that a more significant pullback in agricultural commodities is baked in. As a result, I’d not hesitate to buy the dip in the name if you’re an income investor who seeks lowly correlated returns over the long haul.
The 2.83% dividend yield may be modest, but it’s poised to keep growing at an impressive rate from here. Longer term, look for a growing population to call for higher crop yields, and with that, more demand for fertilizers like potash.
