Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

2 Dividend Value Stocks to Buy Now

Published 2019-03-23, 08:07 a/m
Updated 2019-03-23, 08:36 a/m
2 Dividend Value Stocks to Buy Now

2 Dividend Value Stocks to Buy Now

2 Dividend Value Stocks to Buy Now

The 15% stock market correction from August to December seemed like a dream. In less than three months into the new year, the market has already nearly fully recovered.

This poses a problem: good value stocks are now much harder to find. We’ve searched far and wide and discovered these dividend stocks to have excellent value and tremendous upside potential.

Without further ado, here they are.

Manulife Manulife Financial (TSX:MFC)(NYSE:MFC) is the largest life and health insurance company on the TSX by market cap. It has a market cap of about $45 billion despite the stock is off a fair amount from its 2018 high.

Manulife has operations in Canada, the United States, and Asia with more than $1 trillion of assets under management and administration. Last year, it reported record core earnings and net income of $5.6 billion and $4.8 billion, respectively.

While growing its profitability, the company has returned cash to shareholders in a growing dividend. Indeed, Manulife has increased its dividend every year since 2014; its five-year dividend growth rate is 11.8%.

Manulife is easily the cheapest dividend-growth stock on the TSX. At $22.92 per share as of writing, it trades at a very cheap price-to-earnings ratio (P/E) of about 8.3, while the company is estimated to increase earnings per share by 10% per year over the next three to five years.

Manulife stock is a no-brainer for value. Further, it offers a safe dividend that’s supported by a payout ratio of about 35% this year. Its yield is also competitive at 4.36%.

Its near-term upside potential of more than 22% and total returns of almost 27% (according to Thomson Reuters’ mean 12-month target) are enticing.

Transcontinental Transcontinental (TSX:TCL.A) is a curious idea for value and dividend. First off, the company offers a 5.2% yield that’s supported by a payout ratio of about 35% this year.

Transcontinental has a relatively juicy dividend yield because the company is undergoing a major transformation; the stock has been pushed down a lot due to the uncertainty. So, its low payout ratio is reassuring for the dividend safety because its earnings will likely be lumpy in the near term.

Management seems to be committed to the dividend. They just raised the dividend by almost 4.8% at the end of February and have increased the dividend every year since 2002.

The market isn’t expecting much from the company right now. Transcontinental trades at $16.88 per share as of writing, which implies a dirt-cheap forward P/E of about 6.7!

Even low-balling a target P/E of 8, we’re still looking at more than 19% upside. Scotiabank actually has a one-year target of $22 on the stock, which represents a P/E of about 8.7 and more than 30% near-term upside. Between these two projections, we’re estimating strong total returns potential of about 24-35% over the near term!

Investor takeaway Unlike the relatively expensive market, Manulife and Transcontinental offer value and massive upside. Moreover, in the case of another market correction, investors can get periodic returns from their decent dividends while they wait for the market to recover.

Fool contributor Kay Ng owns shares of MANULIFE FIN.

The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool Canada’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Motley Fool Canada 2019

This Article Was First Published on The Motley Fool

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.