The Canadian stock market may be at or around new highs, but there are still plenty of dividend stocks that offer a pretty decent value. As the chase for yield heats up with every rate cut from the Bank of Canada, passive-income investors may have a “last call” of sorts before rates and yields have a chance to normalize.
Though more rate cuts are priced into some higher-yielding beneficiaries of lower interest rates, I still think there’s room to gain over the next five quarters or so. So, without further ado, here are two solid passive-income picks to consider scooping up while they’re still cheap and their yields are bountiful.
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Quebecor
Quebecor (TSX:QBR.B) is a Canadian telecom wireless play that’s not as rich with yield as its peers. The proud new owner of Freedom Mobile still has a ton of work to do if it’s to disrupt its much larger rivals and grab a share of the Canadian wireless market.
Indeed, the wireless scene is ripe for disruption. And though Canadians may pay hefty prices on their phone and internet bills, the shares of the telecom companies have not been pretty rides for investors in recent years. High rates are just part of the reason they’ve been running out of rally fuel. As rates fall, telecoms are bound to feel the relief. And for potential industry disruptors like Quebecor, I’d argue that there’s serious room to ride higher.
The stock looks quite undervalued at just 11.1 times trailing price to earnings (P/E), at least compared to its wireless growth profile. The dividend yield of 3.74% is minuscule in comparison to the much larger competitors it seeks to disrupt. In the meantime, growth projects and acquisitions seem likelier as rates fall back to Earth. As Freedom Mobile punches its ticket to the 5G wireless bandwagon, things could get very interesting as the battle for Canadian subscribers moves into a new era.
If you want a growth telecom and are willing to get paid a smaller yield, QBR.B stock is a great buy right here.
Enbridge
Enbridge (TSX:ENB) stock has had a rather decent year, rising just shy of 14% year to date. The dividend sits at 6.66% and could stand to compress further as the tailwind from lower interest rates gradually begins to kick in. Additionally, pipeline rate hikes could jolt the firm’s profits and enable it to continue rewarding its loyal shareholders with dividend increases. Additionally, Enbridge has ample expansion projects that could power many years’ worth of consistent dividend increases.
Either way, I don’t think the full extent of low rates is fully reflected in shares quite yet. Regardless, management seems poised to put its foot on the gas to keep cash flows steadily ascending over the long haul. Simply put, Enbridge is a dividend star in the making if it isn’t already.
Indeed, the pace of dividend hikes has been rather modest in recent years. However, as rates fall and new projects begin generating cash flows, look for the dividend increases to be more generous.
Over the past five years, Enbridge has dealt with rough headwinds, but that hasn’t stopped it from averaging mid-single-digit dividend growth. If you thought these hikes were generous, just wait until the wind is at the firm’s back for a change!
