Q: Magna, Parkland, and Premium Brands have seen significant declines, making them look like attractive dividend stocks with yields around 4%. What do you think about buying them for their dividends? Is there a risk that these stocks could fall further? Which one would be the best to buy for its dividend and potential recovery, and which one should I avoid? Please rank them.
5i Research Answer:
We think all of these names are holds in general. While it has the lowest yield of the three, we think MG would be the best value/dividend buy. Results have been weak over a few quarters for MG now, but we think that a bottom is forming. MG is also the cheapest at 7x forward earnings. There are risks with all three of further declines, especially with the recent strength of the market. We think MG has the best potential here and momentum has actually been improving in recent months whereas PKI and PBH have been steadily downward over the last year. We rank them: MG, PBH,PKI.