2 Canadian Dividend Stars That Are Still a Good Price

It might feel like those high-quality dividend stocks are becoming somewhat harder to come by, especially after the latest run-up in the TSX Index. And while various valuation metrics, at least on average, might be skewing towards the higher end of the three-year historical range, there are some names under the surface that still provide decent value for the money. Indeed, quality stocks at good prices might not be as abundant this May, but that doesn’t mean you should forego the fairly-priced dividend payers in favour of timing a near-term correction of sorts.

In my view, buying quality at a fair price beats waiting for a correction, which is tough to time by the way, and risking losing one’s purchasing power through inflation, which could come tough to control as energy prices work their way through a broad range of goods. At the end of the day, higher oil means higher transport costs and price hikes for quite a few goods that have seemingly only gotten markedly more expensive with time.

In any case, dividend growth stocks can help you stay ahead of inflation and even earn some “real” (that’s after-inflation) growth.

Restaurant Brands International

Shares of Restaurant Brands International (TSX:QSR) are having a breakout year, and the rally might not be over just yet. The fast-food industry is in a bit of a mixed spot, with some industry icons that have sold off of late. Indeed, we’re in an environment where value really does matter.

But when it comes to fast food, it’s not just about stacked value menus or low prices. Quality and menu innovation still matter. And on all fronts, I think it’s safe to say that Restaurant Brands gets an A-grade of late. The firm behind Tim Hortons, Burger King, and Popeye’s Louisiana Kitchen is finally firing on all cylinders. Past investments and bold moves, like reinventing the famous Burger King Whopper, are finally starting to pay big dividends.

It took long enough, but Restaurant Brands is finally a model of success, and as it continues its momentum, I think dividend growth investors might wish to hang on for the long haul. The stock might seem pricier after gaining over 20% in the past year. But with a 3.3% dividend yield and a secret sauce that’s allowing Restaurant Brands to excel where its rivals are stumbling, I think the premium price of admission is now more than warranted, especially as the firm looks to become the king of value.

Fairfax Financial

Shares of Fairfax Financial (TSX:FFH) have a dividend yield that’s just south of 1%. But after a relatively flat year of gains, I do think that Prem Watsa’s legendary firm is ready to move on. First, the stock looks quite cheap at 8.2 times trailing price-to-earnings (P/E) after sinking into a correction.

While the expectations bar is a bit higher after the historic five-year surge that saw shares more than triple, I still think there’s a lot of deep value to be had in an insurance firm that’s operating at a high level while tailwinds intensify. I think it’s a mistake that shares are hanging onto a single-digit P/E multiple and would look for the firm to make up for lost time after a 2025 “digestion” year.

The post 2 Canadian Dividend Stars That Are Still a Good Price appeared first on The Motley Fool Canada.

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More reading

• The Key Things to Understand Before Holding U.S. Stocks in a TFSA
• The Best Canadian Stocks to Buy and Never Sell Inside a TFSA
• 2 Dividend Stocks I’d Hold in an RRSP and Never Consider Selling
• The 3 TSX Stocks I’d Be Most Eager to Buy at This Moment
• 3 Canadian Stocks to Buy if Rates Stay Higher for Longer

Fool contributor Joey Frenette has positions in Restaurant Brands International. The Motley Fool has positions in and recommends Fairfax Financial. The Motley Fool recommends Restaurant Brands International. The Motley Fool has a disclosure policy.