A good dividend stock pays and even raises its dividend whether the market goes up or down. As long as you don’t sell the shares, you will always get a positive return (the dividends you receive) no matter how the market behaves. Recently, there has been a lot of volatility in the Energy sector due to oil price plummeting so an investor could value dig there to get a high starting yield and potential return once oil price goes up again…that is if one can stand the volatility and the possibility of more downside in the near-term. That’s why I like buying in small chucks at opportune times when a company on my watchlist is priced at a value. Dollar-cost averaging allows the flexibility of buying more shares at a lower price when the market behaves negatively.
For this month, I looked over my current holdings to see which dividend payers are good values to buy. There are also other good Energy companies to look into, including Exxon Mobil Corporation (NYSE:XOM), Enbridge Inc (TSX:ENB)(NYSE:ENB), TransCanada Corporation (TSX:TRP)(NYSE:TRP), Inter Pipeline Ltd (TSX:IPL), Suncor Energy Inc (TSX:SU)(NYSE:SU), Cenovus Energy Inc (TSX:CVE)(NYSE:CVE), Canadian Natural Resources Limited (TSX:CNQ)(NYSE:CNQ), and Vermilion Energy Inc (TSX:VET)(NYSE:VET).
Classic Dividend Companies
This list shows the current yields, and I believe are good starting yields (with respective to the company’s historical yields) to start buying into these companies if you believe in the future of these companies.
- Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) – yield: 4.16%
- Chevron Corporation (NYSE:CVX) – yield: 3.96%
- International Business Machines Corp. (NYSE: IBM) – yield: 2.82%
Bank of Nova Scotia
Bank of Nova Scotia is the third largest bank in Canada. This Canadian leading bank provides financial services in over 55 countries. It’s medium-term objectives were met in 2014. The 2015 medium-term objectives is the same as 2014. For example, earnings per share growth is expected to be between 5 and 10%, while return on equity is expected to be between 15 and 18%.
Source: Bank of Nova Scotia Q4 2014 Investor Presentation, Slide 5
Chevron is a large oil company, which pays an attractive dividend of over 3.9%, 20% higher than its 5-year average of 3.3%. It’s paying out 38% of its earnings for its dividends. Historically, this is at the higher end of its yield range, unless one wants to shoot for above 4.25%, which looks possible.
CVX Dividend Yield (TTM) data by YCharts
If history is telling, then, having raised dividends for 27 years in a row, CVX will be increasing its dividend in Q2 of 2015 even amidst low oil prices. Additionally, Morningstar gives it 4-stars, meaning the shares are currently undervalued.