Buying blue-chip companies on the TSX when they dip, especially those with high dividend yields, can be a smart move for long-term investors. Historically, blue-chip stocks tend to bounce back quickly after dips, providing a chance to snag shares at a discount.
What's more, statistics show that reinvesting dividends from these high-yielding blue-chip stocks can supercharge your returns. This means that not only do you benefit from the stock's recovery, but you also get to compound your returns with those juicy dividends. So, let's look into some of these blue-chip stocks to get you on your way.
BCE
BCE (TSX:BCE) is looking like a valuable pick right now, and it's easy to see why. For starters, it's offering a robust forward annual dividend yield of 8.5% as of writing. Despite recent market fluctuations, BCE has managed to maintain a strong dividend payout. This averaged 6.1% over the past five years. The high yield is underpinned by the company's solid revenue base of $24.6 billion over the trailing 12 months and a healthy operating margin of 24.1%.
BCE's ability to generate steady cash flow at $7.6 billion in operating cash flow over the same period supports its commitment to returning value to shareholders. This makes it a compelling choice for those looking to add reliable income to their portfolios. Moreover, BCE's current valuation suggests it might be undervalued relative to its long-term potential.
The stock's forward Price/Earnings (P/E) ratio of 15.6 is quite reasonable. Especially when you consider the company's strong market position and consistent profitability. With a market cap of $42.9 billion and a Price/Book (P/B) ratio of 2.7, BCE is not only a stable player in the Canadian telecommunications industry. It also offers potential for capital appreciation as the market recognizes its value. Add to this the fact that BCE has recently seen 55.5% year-over-year growth in quarterly earnings, and you've got a stock that's not just about dividends but also about long-term growth potential.
CNR
Canadian National Railway (TSX:CNR) also looks like a solid investment right now, and there are a few key reasons why. The company continues to show robust financial performance, with a 7% increase in revenue and revenue ton-miles (RTMs) in Q2 2024. This demonstrates its ability to grow even in challenging environments. With an impressive operating margin of 40.4% and a return on equity of 27.4%, CNR is efficiently converting its revenue into profit. This makes it a financially strong company in the long term. The stock also offers a decent forward dividend yield of 2.2%, providing a steady income stream while you hold onto your shares.
Furthermore, CNR's disciplined approach to growth and commitment to its capital program make it a valuable addition to any portfolio. Despite facing some operational challenges, the company remains focused on its long-term financial outlook. It currently targets compounded annual diluted earnings per share (EPS) growth of 10%-15% over the 2024-2026 period.
This commitment to growth, coupled with their efficient operations and a strategic focus on sustainable development, positions CNR as a reliable investment that can weather economic fluctuations, all while continuing to deliver value to its shareholders. If you're looking for a stock with a strong track record and promising future prospects, CNR certainly fits the bill.
Scotiabank
Finally, Bank of Nova Scotia (TSX:BNS) looks valuable as well. Despite some macroeconomic challenges, BNS has managed to deliver solid results in its recent quarter, with net income reaching $2.1 billion. The bank's ability to maintain strong revenue growth while keeping expenses in check has resulted in positive operating leverage. Additionally, BNS offers an attractive forward annual dividend yield of 6.6%. And with a payout ratio of around 70%, the bank shows a strong commitment to returning capital to shareholders, all while maintaining sufficient resources for future growth.
Plus, BNS's international presence adds a layer of diversification. Its International Banking segment contributed $701 million in adjusted earnings last quarter. This global footprint, coupled with disciplined expense management and strong capital ratios, positions BNS well for long-term stability and growth. For investors seeking a reliable financial institution with a solid dividend and global reach, BNS certainly stands out.