1 Cheap Dividend Beast I’d Buy Over TD Stock Today

TD Bank (TSX:TD) stock is a solid hold but I’m looking to snatch up an alternative dividend beast in the first half of the summer.

| More on:

TD Bank (TSX:TD) is the second largest of the Big Six Canadian banks and the second-largest stock on the TSX by total market capitalization. Today, I want to look at the bank’s recent performance and discuss how its prospects look going forward. Moreover, I want to target a top dividend beast that looks undervalued at the time of this writing. Let’s jump in.

Here’s why I’m looking beyond TD Bank stock right now

Shares of TD Bank have climbed 4.1% month over month as of close on Monday, July 17. Meanwhile, the top bank stock is still down 3.9% so far in 2023. Its shares are up 5.7% in the year-over-year period. Investors can see more of its recent performance by playing with the interactive price chart below.

This top bank released its second-quarter (Q2) fiscal 2023 earnings on May 25. In the first half of fiscal 2023, TD Bank reported adjusted net income of $7.90 billion, or $4.17 per diluted share — up from $7.54 billion or $4.17 per diluted share in the first half of fiscal 2022. The bank has continued to see positive results in its Canadian and United States Personal and Commercial Banking segments on the back of higher margins and volume growth as interest rates are on the rise.

Despite the increase in net interest income, TD Bank and the broader financial space are facing big challenges in the current climate. That is why I’m looking elsewhere in the summer of 2023.

This telecom dividend beast is my chosen alternative today

Cogeco Communications (TSX:CCA) is the dividend beast I’m looking to snatch up over TD Bank right now. This Montreal-based communications corporation operates throughout North America. Shares of this dividend beast have increased marginally over the past month. The dividend stock has plunged 15% in the year-to-date period.

The company unveiled its third-quarter fiscal 2023 earnings last week on July 13. Total revenue rose 1.9% year over year to $741 million. That was powered by Canadian telecommunications revenue growth of 3.2%, as it credited “the cumulative effect of high-speed Internet service additions.” EBITDA stands for earnings before interest, taxes, depreciation, and amortization. Cogeco reported adjusted EBITDA of $351 million in the third quarter of fiscal 2023 — up 1.1% from $341 million in the previous year. Moreover, adjusted profit rose 2.1% to $103 million, and adjusted diluted earnings per share jumped 6.8% to $2.34.

In the first nine months of fiscal 2023, revenues increased 3% to $2.24 billion. Meanwhile, adjusted EBITDA climbed 2.3% to $1.06 billion.

Why this dividend beast looks dirt cheap

Shares of this dividend beast currently possess a very attractive price-to-earnings ratio of 7.3. That puts Cogeco Communications in very favourable value territory compared to its industry peers. Cogeco Communications last paid out a quarterly distribution of $0.776 per share. That represents a very solid 4.6% yield. Better yet, Cogeco Communications has achieved 19 consecutive years of dividend growth.

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 Ambrose O'Callaghan has positions in Toronto-Dominion Bank. The Motley Fool recommends Cogeco Communications. The Motley Fool has a disclosure policy.

More on Dividend Stocks

hand stacks coins
Dividend Stocks

3 Ultra-High-Yield Dividend Stocks You Can Buy and Hold for a Decade

These three high-yield dividend stocks still have some work to do, but each are in steady areas that are only…

Read more »

senior man and woman stretch their legs on yoga mats outside
Dividend Stocks

TFSA: 2 Canadian Stocks to Buy and Hold Forever

Here are 2 TFSA-worthy Canadian stocks. Which one is a good buy for your TFSA today?

Read more »

calculate and analyze stock
Dividend Stocks

This 5.5% Dividend Stock Pays Cash Every Single Month!

This REIT may offer monthly dividends, but don't forget about the potential returns in the growth industry its involved with.

Read more »

Silver coins fall into a piggy bank.
Dividend Stocks

How to Use Your TFSA to Earn up to $6,000 Per Year in Tax-Free Passive Income

A high return doesn't mean you have to make a high investment -- or a risky one -- especially with…

Read more »

path road success business
Dividend Stocks

2 High-Yield Dividend Stocks to Buy Hand Over Fist and 1 to Avoid

High yields are great and all, but only if returns come with them. And while two of these might, another…

Read more »

Man holds Canadian dollars in differing amounts
Dividend Stocks

This 7% Dividend Stock Pays Cash Every Month

A high dividend yield isn't everything. But when it pays out each month and offers this stability, it's worth considering!

Read more »

young people stare at smartphones
Dividend Stocks

GST/HST “Vacation”: Everything Canadians Need to Know

The GST/HST "vacation" is a little treat for the holidays, along with a $250 payment. What should you do with…

Read more »

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 »