Use The Bear Market To Pick Up Discounted Dividends

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Last week, while speaking at a conference in Tokyo, I told the audience that the bear market of 2022 was the best thing to happen to income investors in a long time.

Not only did rising interest rates make it possible to finally earn a decent yield on fixed-income investments, but depressed stock prices pushed yields higher.

As a result, today you can pick up some terrific, high-quality companies at a discount to where they were trading a year ago, despite growing earnings. And the best part is you’ll earn a strong dividend yield.

Let’s take a look at a few dividend stocks now trading at a discount.

  1. Bank of Montreal (NYSE: BMO) A year ago, if you’d bought shares of Bank of Montreal, you’d have forked over around $108 per share. Today, you’ll pay a little over $90.

    Earnings per share have grown 20% over the past five years and are projected to grow 5% next year. Meanwhile, with a price-to-earnings (P/E) ratio of 9, it’s trading 15% below its five-year average P/E.

    The stock yields 4.5%. If you’d bought it a year ago, you’d be earning a 3.8% yield.

    Here’s another one…

  1. Global Ship Lease (NYSE: GSL) Global Ship Lease has a big 8.8% dividend yield. Had you bought the stock a year ago when it was trading above $22, you’d be earning two percentage points less.

    Global Ship Lease is forecast to grow earnings by 10% next year. The expected $8.62 in earnings per share in 2023 means the stock trades at a ridiculously low two times projected earnings.

  1. HP Inc. (NYSE: HPQ) Lastly, HP Inc., previously known as Hewlett-Packard, is trading at a significant discount to where it was a year ago. Today, the stock is roughly 25% lower than where it was last December, despite the expected 10% earnings growth in fiscal 2024.

    The stock trades at just seven times earnings, a near 30% discount to its five-year average and a stunning 60% discount to its sector average.

    Today, the stock yields 3.7%. But if you’d bought the stock a year ago, you wouldn’t even be earning 3%.

These are just a few examples of why a bear market can be a long-term investor’s best friend. You get the opportunity to pick up cheaper shares and higher yields on companies that are growing despite their recent stock prices.

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