Passive income investors might conclude that returns, at least on average, are not as plentiful as they were a few years ago. Combined with the less generous interest rates on guaranteed investment certificates and tepid returns on various exchange-traded funds (ETFs) or other funds, it could be a bit more tempting to chase returns with more expensive investment products (think covered call ETFs) or with distressed dividend stocks that only have higher returns due to a share price implosion.
While buying multi-year dips may not be the key to raking in huge yields while getting back to decent capital gains, I think there are opportunities with misunderstood dividend situations that much of the market is overlooking for some reason.
Enter shares of Thomson Reuters (TSX:TRI), a fallen media and software play that has been on the receiving end of the recent software sell-off. After falling nearly 50% over the past year, the iconic Canadian stock now returns 2.61%.
Thomson Reuters is an AI innovator with a juicy payout
That is almost double what is normal. And if the selloff isn’t quite over yet (it’s hard to tell when imploded stocks bottom out), there might be an opportunity to buy TRI stock with a 3% yield. Either way, the name stands out as a win-win for value investors looking for a good dose of extra income. With a dollar-cost averaging (DCA) strategy, you can get your ticket at a discount of almost 50%, while also leaving the door wide open to pick up stocks with a 3% yield should another mistake be on the horizon.
For the most part, I think there’s a good chance that either scenario could happen in the near term. However, for long-term investors, I think today’s entry point looks quite favorable. It’s not too often that you can get shares of an AI innovator with a yield above 2%.
In case you missed it, Anthropic’s legal AI tool is helping investors ditch potentially disruptive companies like Thomson Reuters. But investors appear to be overreacting to the tool’s release. Not only does Thomson Reuters have great AI innovations behind the scenes (the company recently acquired an AI startup called Noetica), but it also has the data.
Thomson Reuters has confidence in its own AI agent and is buying back shares
Thomson Reuters’ CoCounsel AI will not go down without a fight. And while Anthropic’s tool shows promise, I’d be inclined to give CoCounsel the edge, given its agentic capabilities and track record within an ecosystem built on trust.
With management recently announcing plans to purchase approximately $600 million worth of stock, it appears insiders are seeing AI’s recent sell-off more as an opportunity than anything else. I think they’ll be proven right once AI fears subside and investors start bottom fishing in the hardest-hit software names. Now that the company has increased its quarterly dividend by a generous 10% after the last (fourth) quarter, I couldn’t be more optimistic about the name, even as investors sell on the magnitude of the uncertainty.
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