TFSA Investors: 1 Dividend Aristocrat to Buy Now and Keep for Decades
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TFSA investors should insist on holding their favorite dividend-paying stocks for decades at a time. Indeed, long-term investing is the proven way to build life-changing wealth. Although time horizons and attention spans have shrunk in recent years, in part due to the desire to get rich quick, TFSA investors should measure their investment horizons in years or even decades, not only in weeks or months.
Personally, I think a 20-30 year investment horizon is ideal for young people today. During such a period, you will see more than a handful of crashes, bear markets and surprise shocks. So far, we have already suffered two tough market sell-offs in the 2020s. Indeed, volatility is an enemy of short-term traders. But it’s arguably a friend for long-term investors looking to build a TFSA retirement fund over decades. By 2040, few will even remember the bumps in the road en route to much higher levels.
Thinking longer term, these daily moves won’t rattle you as much or at all. In fact, you can hope the markets correct themselves so you can add to your favorite stocks in your TFSA.
It’s been a tough year, to say the least. And while stocks have recovered some ground, many of these names still boast attractive valuations. In this article, we’ll take a look at a wonderful dividend-paying stock that struggled in its slack year, but is poised to come back strong over the next three to five years. However, I would look to own the stock for decades, given that its growing dividends act as a gift that keeps on giving.
Without further ado, let’s take a closer look at the banking sector. It has been badly battered of late, with various analysts fearing that loan losses could skyrocket in the event of a recession.
Scotiabank: This dividend aristocrat is down, not out
Scotiabank (TSX:BNS)(NYSE:BNS) just fell 5.3% in a single day after the release of brutal results. The international segment led Scotiabank through a rough patch. Meanwhile, Scotiabank is already raising its expectations for credit losses ahead of a slowdown in 2023. Total PCLs (provisions for credit losses) reached $412 million.
Banks tend to take a hit on the chin when the economic outlook falters. After the last post-earnings flop, BNS stock is once again flirting with bear market territory. The stock trades at a price/earnings ratio (P/E) of 9.3 times, with a dividend yield of 5.4%. Stocks look cheap historically and relative to industry averages. However, given the pain that may be ahead, the price-to-book (P/B) multiple seems like a better indicator of value. On this front, SNB stock looks cheap just south of 1.5x P/B.
Scotiabank is in a tough spot right now, but it has an exceptional management team that can help it move forward after a brutal third quarter. Although the bottom is yet to be reached, I would argue that the inflated dividend makes the name a top long-term pick after its latest plunge.
For a bank known for beating quarterbacks, a failure can be detrimental. I think many were too quick to throw in the towel on a blue chip whose stock price and dividend are likely to be much higher in 5-10 years.