Weekend Update #460 - December 4th, 2021
Dividend Stocks
Stocks covered: T, UNM, WBA, ABBV, FSZ.to, TRP, TRP.to, MFC, MFC.to, TCL.A.to]
Dear Friends of Purple Chips,
On Thursday, the Dow was at 34,600 after behaving like a rollercoaster on the news that the Omicron variant is here.
In this video, we look at the power of dividends. We highlight dividend stocks that have low PE multiples and high dividend yields. The stocks we cover are:
AT&T, UNUM, Walgreen Boots, Abbvie
Fiera Capital, TC Energy, Manulife and Transcontinental Corp
Please click on the icon below to view the video.
Transcript for Update 460:
This week, the Dow Jones traded between 34,000 and 35,250 and according to
the media the volatility was mainly driven by worries about the latest iteration of
COVID – the Omicron variant. Personally, I think the real news is that investors
are starting to realize that the easy money taps are starting to close, so investors
are taking some money off the table.
Slide 3 – Valuations
On Wednesday, the low valuations were
Mastercard, Amgen, Fiserv, Checkpoint, Chegg, Alibaba, Walgreen
Boots, Fidelity National, Global Payments, Cigna, Veeva Systems,
Fresenius Medical, Universal Health, Merck, Bristol Myers, Facebook,
Tencent and AT&T.
On the TSX there was Stella Jones, TC Energy, Saputo and Fiera Capital.
Slide 4 – Spotlight - Eurozone
In the Spotlight this week, the Scotia analysts look at Inflation. The first comment
is about inflation in the Eurozone
Slide 5 – Spotlight – Not transitory
And this one is about the FED saying that inflation is no longer “transitory” and
that they may speed up the pace of tapering. This is FED-speak for saying that
they will reduce asset purchases – which help to stimulate the economy.
Please pause your video to read this.
Slide 6 – Satellite Holdings
There were no changes in our positions.
Slide 7 – Core US
n/c
Slide 8 – Core CAD
N/c
Slide 9 – Reflections
This week, I look at stocks that have attractive dividend yields. Historically most of
the return that an investor can make comes from dividends, so I came up with a
list of US and Canadian stocks that all have attractive yields and reasonable
valuations. Almost all of the stocks that I mention here are trading at under 10X
earnings and have good dividend yields.
Regarding yield, please keep in mind that dividend yield is very transparent or
efficient. As a rule of thumb, a higher yield means higher risk. In other words, a
stock with an 8% yield is usually riskier than a stock with a 4% yield.
However, the market isn’t always right and there are many factors to consider
when assessing risk levels.
I’ll start with some US stocks and finish with Canadian stocks.
Slide 10 – ATT
Here’s AT&T, it has a yield of 9.2% and trades at 6.7X earnings. The bottom panel
of the chart shows the dividend growth over the last 20 years.
This looks like an exaggerated year end sell-off.
Slide 11 – Unum
Unum pays a 5.2% dividend and trades at 5X earnings. This looks like a good risk
reward proposition.
Slide 12 – WBA
Here’s Walgreen Boots, it trades at 9X earnings and pays a 4.3% dividend.
Slide 13 – ABBV
This is ABBVIE, it trades at 9.5X earnings and yields 4.8%.
Slide 14 – FSZ
Now for some Canadian stocks: Here’s Fiera Capital, it trades at 7X earnings and
yields 8.2%.
Slide 15 – TC Energy
This is TC Energy – formerly TransCanada pipelines, it trades at 13.5X earnings and
yields 5.9%.
Slide 16 – MFC
This is Manulife, it trades at 7.4X earnings and yields 5.6%.
Slide 17 – TCL.A
This is Transcontinental, it trades at 7.8X earnings and yields 4.8%.
So that my friends is a list of companies that are attractively valued and pay good
dividends. The nice thing about these is that over time the dividends tend to go
up by more than the rate of inflation, so this is a great way to build an inflation
proof retirement fund.
Slide 18 – Power of div’s
I’ll close with this chart that shows that dividends are the engine behind good
long-term returns. This shows the growth of $10,000 from 1960 to 2020 by
investing in value stocks that pay dividends and compares it to investing in growth
stocks that do not pay dividends.
The bottom line is that dividends are really an important part of your long-term
returns.
- END –
So that’s all for this week, I’m john Schwinghamer, the author of Purple Chips,
have a great weekend!