With the stock market returning to pre-recession levels it has become a lot more difficult to find a bargain lately. Corporate earnings have been beating expectations and a lot of stocks have reached their 52 week highs.
Back in early 2009 I picked up the majority of my dividend stock portfolio and there were plenty of bargains to be had, with some blue-chip stocks yielding close to 10%. Today there are just a few high yielding large cap stocks for the value investor to choose from. Here’s a look at three dividend stocks currently on my radar:
Bell Canada Enterprises – BCE
BCE is the largest communications company in Canada. It has roughly 6.5 million fixed-line phone customers, 7.2 million wireless customers, 2 million high-speed internet customers, and 2 million satellite television customers. They own 15% of both CTV, Canada’s leading private broadcaster, and The Globe and Mail, Canada’s leading national newspaper. They also hold a 45% stake in the Bell Aliant Regional Communications Income Fund.
Since putting their dividend on hold in mid-2008, BCE has managed 5 dividend increases since 2009 and now yields a juicy 5.5%. Although the stock currently trades near its 52 week high, with a P/E ratio of just over 12 BCE is still value priced.
I’m not nearly as bearish on the Canadian telecom industry as some investors. While they continue to lose landline customers, BCE is strong in its wireless business and has Canada’s largest satellite TV operation, making this more like a utility stock with some upside for growth. I added to my position with Telus back in 2010 and I’m considering doing the same with BCE this year. My yield on cost is nearly 8.5% already with this stock.
Shoppers Drug Mart – SC
Shoppers Drug Mart is Canada’s leading retail drugstore chain. It fills about 20% of the nation’s prescriptions and has a network of more than 1,300 retail stores. Prescription drugs account for almost half of sales. The remainder of sales comes from convenience items, over-the-counter medications, beauty products, and other items in the front of the store.
This stock took a beating last year after regulatory reforms to selling generic prescription drugs took effect in Ontario and other provinces. But the changing landscape of retiring baby boomers will have an impact on the health care industry and Shoppers Drug Mart should benefit in the long term.
While the 2.3% yield on this stock won’t thrill investors from the onset, Shoppers Drug Mart is a dividend growth all-star, with an 18% annual dividend growth rate over the past 5 years.
Sun Life Financial – SLF
Sun Life offers financial protection and wealth management products to both individual and corporate customers. It has worldwide operations. In 2010 approximately 52% of net income came from Sun Life Canada, 19% from Sun Life United States, 13% from MFS Investment Management, 6% from Sun Life Asia, and 10% from Corporate, which includes Sun Life UK, reinsurance businesses, and other unallocated items.
SLF is a real dog right now (along with the rest of the insurance industry), with share prices falling nearly 40% since 2007. But there appears to be life in the sector lately, and SLF reached a 52 week high back in February. SLF currently yields 4.8%, which is a full percentage point ahead of their 5 year average dividend yield and a good sign for any bargain hunting dividend investor.
I have been watching SLF closely, waiting for strength to return to the insurance sector. Dividend increases are expected to be about a year behind the big banks, hopefully resuming in late 2011 or Q1 of 2012.
Dividend Stocks: Waiting to Jump In
I typically keep some cash on hand waiting for a dividend growth stock on my watch list to become value priced. These three stocks have been on my radar for some time now, but I have been hesitant to pull the trigger thinking that the market is due for a pull back soon.
At some point when you are selecting a dividend stock for the long term you have to ignore the market as a whole and look at the fundamentals of the individual company. If you feel that there is potential for future earnings growth and dividend growth then don’t be afraid to pull the trigger.
What do you think of these picks, and what dividend stocks are on your radar these days?
