No doubt valuations have been steadily creeping higher across the board, but when it comes to these names I still think there’s a strong argument that shares are undervalued compared to their improving fundamentals and, perhaps more importantly, their impressive dividend growth prospects. Any way you look at it, the following names are, I think, stocks worthy of a potential dividend all-star team.
B.C
First of all, we have those battered shares of B.C (TSX:BCE), which probably lost a lot of investor confidence (and dollars, of course) when it cut its dividend a while ago. The good news is that the new dividend is on solid footing and is likely positioned to grow annually at a rate well above its historical average, especially once the worst of the headwinds pass and BCE is able to expand its margins and gain more market share in the competitive wireless and fiber scene.
After falling nearly 3% on Wednesday, recent recovery gains from earlier this month have now been largely erased. It’s been tough to find a bottom in the $30 billion telecom giant, but I think the stock is worth keeping a close eye on as it appears to be forming something of a bottom.
If we get more rate cuts and the company expands its fiber and wireless infrastructure in a cost-controlled manner, I foresee a scenario where BCE stock can return to profits. Of course, it’s difficult to say the immediate next steps, especially as sales figures are down and the company sees AI data centers as a potential growth area, while the traditional media sector continues to feel the heat.
Can greater involvement in AI help offset the weakness in the traditional sector?
I think it could be. Be that as it may, BCE stock looks like a bargain at a high value as it trades at 4.8 times its price-to-earnings (P/E) ratio, even as profitability pressures loom in the new year. With a nice yield of 5.4% and so much damage to the stock already, I think it’s time to at least think about buying. While I have no idea when the bottom will happen, I will keep an eye on the name and tune in because I think the comeback could be fierce when the time comes.
Enbridge
Enbridge (TSX:ENB) is another name to keep a close eye on as it continues to reach new highs after spending much of the last half-decade in the penalty box, so to speak. Undoubtedly, the mid-market energy titan has the wind at its back, and as it continues to find new growth projects to fuel dividend growth, I wouldn’t be deterred by the apparently “heated” share price. There is still value to be had here, at least in my opinion.
The share is trading at less than 22 times price/earnings with a nice return of 5.6%. Of course, you may have missed the boat on getting a return above 7% for a price-to-earnings ratio in the teens. However, I still think current prices ($68-70) are a fair price to pay for a company that has all the resources to help ENB stock outperform the TSX Index, while exhibiting slightly less volatility (0.82 beta, implying less correlation with the broader market). Enbridge has come a long way, and is probably just getting started as the gas transmission business is really starting to flex its muscles.
#Keeping #Close #Eye #Dividend #AllStars