5 Beaten Down Canadian Dividend Stocks to Consider - Family Money Saver (2024)

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With a slowing economy, downward pressure in the global oil markets and then on top of everything the COVID-19 coronavirus appears – stock markets around the world came crashing down, entering into bear market territory.

While some people watched their capital rapidly erode, others jumped ship entirely and some have hung on for the ride down, even buying along the way.

Who knows if the markets have bottomed out at this point, it really depends on how long this virus keeps our activities limited and how long it takes for everyday life to return to some level of normalcy once this is all resolved.

For those with the stomach to endure putting new capital to work (although be careful and do it slowly in this environment), here are five Canadian dividend stocks that have taken, in my opinion, an unwarranted beaten beyond a rational price points based on their business metrics and future prospects.

These stock picks focus on mostly high yielding, Canadian dividend equities with the potential for large capital returns over the next one to two year period on a recovery. All speculation on my part of course, but I am happy to hold any of these companies, barring any major changes to their business operations or outlook.

Enbridge

ENB.TO (SP/$38.63 – Yield 8.39%)

Enbridge stock has taken a huge beating along with everything else lately and to me seems like an opportunity after coming down from a high of $57.32. While the energy industry is in some trouble, that doesn’t mean oil and gas will cease being shipped throughout the country. The stock seems to be unreasonably punished and lumped in with the above mentioned group, even though they don’t have the same commodity exposure as pure oil & gas plays. This is more of an emotional pullback or panic selling.

People still need to keep their homes warm and gas will still flow through the Enbridge toll routes. As a regulated utility this is a company that should maintain it’s earnings even during an economic downturn. There is positive news regarding Line 3 completion, earnings should continue to increase over the next few years and there are more capital projects in the ‘pipeline’ that will generate future earnings and cash flow to sustain the dividend and further growth. It may take awhile to get back to the highs, but with a ridiculous 8% yield in a defensive stock, I don’t see how you an go wrong owning this over the long term at $38 bucks.

I have currently purchased what I’d consider to be a 1/3 position in my RRSP account and will add again if the price drops below $34 or we see some further stabilization or clarity in regards to the Covid-19 situation.

Brookfield Asset Management

BAM-A.TO – (SP/$39.60 – Yield 2.42%)

Brookfield as a whole is a juggernaut of a company. Brookfield Asset Management are well positioned for any sort of downturn as the company is well diversified geographically, has real tangible assets in things like infrastructure, renewable energy, real estate and more. The world will keep turning while this pandemic plays itself out, and although stocks are temporarily punished, I have no doubt that the value in Brookfield will again be unlocked over time.

The dividend here isn’t huge by any means, but with the share price down from it’s recent high of over $60, there is ample room for capital appreciation and you are investing in a world class company with world class assets and management – a company you can sleep well at night holding.

I currently own a small position of BAM.A in a registered account.
(Note for tracking purposes – Brookfield Asset Management announced a three-for-two stock split of the company’s outstanding Class A Shares. The split will be implemented by way of a stock dividend whereby shareholders will receive one-half of a Brookfield Class A Share for each Class A and Class B Share held (i.e. one additional share for every two shares held) – as of April 2, 2020.)

Royal Bank

RY.TO (SP/$83.05 – Yield 5.20%)

The banks have taken a huge hit to their share prices since late February, resulting in big fat yields not often seen in the Canadian banking sector. Royal Bank share price has recovered slightly since the lows, but I am still holding off on making any large purchases on bank stocks for now, however RBC would be one I will consider.

Royal Bank is one of the largest companies in Canada, on of the largest banks in the world in fact. You probably can’t go too wrong buying on the dip at this point if you are a long term investor. The stability of Canadian banks can be attested to with how they withstood pressures of the financial collapse in 2008/2009 and even further diversified their businesses afterwards. RBC should grow at an annual rate of 6-8% and payout 40-50% of their earnings to shareholders. They may have lower growth this year, but dividend growth and capital appreciation over the long term is very dependable in this name. You can buy a stake now for about 1.5x book and Royal is one of the most diverse banks in Canada.

I have traded out of Royal Bank, as I lucked out and purchased at the very lows only to have it very quickly rebound to $80. I’m a bit hesitant on the banks at the moment as the economy is on hold, so hoping for another pullback possibly greater than before as things play out, so I am ready to start adding if we see another drop in RBC.

Canadian Natural Resources

CNQ.TO (SP/$18.48 – Yield %8.11)

One of the best and lowest cost operators in North America. in the oil and gas sector. CNQ has been beaten down mercilessly along with all the other oil and gas stocks in Canada. Particularly now with the Saudi / Russia production dispute coupled with coronavirus resulting in decreased demand for oil.

All of these negatives were priced in and more in my opinion as this stock went all the way down to $11 dollars and a huge yield! If you want to make a bet on an oil stock, this is a high quality name and will be a most likely survivor. Plus, with a hefty dividend to boot, how can you not like this buy? There is potential for 3x capital appreciation here in a short period of time if we see anything like the normal oil process we’ve been used to ($50 – $60 WTI). CNQ’s capital spending over the years has put them in a great position now to flourish on resolution of any or all of these roadblocks. If we see more progress on Line 3 & TMX it’s possible we’ll even see investment dollars return to Canada with CNQ most likely being a beneficiary. The stock is incredibly cheap and the company has been buying back large numbers of shares.

I missed $11 but have been buying anywhere in the $13-$18 range and will likely have a full position soon, possibly overweight soon and will look to trim as the price appreciates to balance within percentage of total holdings. I have little doubt that CNQ will be back in the $30’s or $40’s once oil returns to more rational and sustainable price levels as US production drops. This pick is a no-brainer for me.

Methanex

MX.TO (SP/$16.33 – Yield %12.37)

Methanex is my wild card stock for this article, a more cyclical stock with potential for a dividend cut, but I believe at theses levels we are seeing the low-end of the cycle, which is where you want to buy companies like this. Even looking at a 1-2 year time horizon, with energy prices improving anywhere within that time-frame, you can expect to see a recovery in Methanex share price as well, since it seems to closely track oil pricing. Recall, at the top of the cycle this stock was over $100. Even at a quarter of that, you’d be doing very well on a short-term trade.

The stock is currently inexpensive, they have multiple world-class methanol plants and are geographically diverse. Methanol is used in the manufacturing of things like plastics, which aren’t going away anytime soon. The company is also known to return shareholder value via buybacks.

I’m currently holding a smaller position in MX, only enough that I’m prepared to let that capital sit if needed for a longer period, or lose a fair percentage of if things really go even further south on the energy / economic front. I believe however the risk profile for the potential reward here is acceptable to me.

Note: Prices & Yields are approximate as of April 2, 2020 and will be used for comparison purposes at a future date.

Disclaimer: Talk to a professional advisor before investing or do your own research. This website is for discussion and informational purposes only. These are my opinions, do not base you investment decisions on material found on this website.