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If you’re looking to give your TFSA (Tax-Free Savings Account) or RRSP (Registered Retirement Savings Plan) a bit of a jolt amid this vicious bear market in stocks, you’re on the right track. Thinking about going against the grain at a time like this is a sign that you’ve got what it takes to tune out the noise. Going against conventional wisdom by being a buyer, as others sell, is never easy.
Warren Buffett’s old-time piece of advice to “be greedy when others are fearful” is hard to put into practice. It’s scary, with the bear market now breaking the 10-month mark. Nobody knows what the fate of stocks will be in the final quarter of the year, as the U.S. Federal Reserve continues its (hopefully) last jumbo-sized (75 bps) interest rate hike.
Treat this bear market as a chance to make long-term wealth!
Though volatility could persist for another 18 months, investors should remember that volatility cuts both ways!
Stocks can plunge viciously, but they can also rally sharply, as we discovered earlier this month. Now, every bear market bounce this year has ended in tears. That said, all it takes is one sustainable one for the ship to leave the station. For those who miss it, it could prove very difficult to get back into the stocks you were meaning to buy during this bear market rout.
That’s why the best thing you can do for your TFSA or RRSP is to inch further into the abyss with beaten-down stocks that you still believe in. Not all stocks will rebound. Some will stay in the gutter forever. However, it’s up to you to scoop up the companies that will rise again and avoid the justly corrected stocks like the plague.
Consider overlooked TSX stocks like Algonquin Power (TSX:AQN)(NYSE:AQN) and Northland Power (TSX:NPI). These two renewable energy stocks have robust payouts and trade at modest multiples amid the sell-off.
Algonquin is what I’d describe as a wonderful company that’s been caught up in turbulent times. Shares took another 1% hit on Friday, bringing the name to a fresh new 52-week low at $14 and change per share.
The dividend, currently yielding 6.7%, is the highest it’s been outside crisis-level conditions. Though rising interest rates and an economic downturn have weighed on shares, I think it’s quite absurd that AQN stock is below its 2020 lows. Down more than 33% from its high, I view Algonquin as one of the better bargains the TSX Index has to offer.
The company has a solid pipeline of green energy projects. With a high degree of regulation and recent acquisitions to be integrated, Algonquin seems poised to continue raising the bar on its dividend payout over the long run.
Northland Power is another renewable energy developer that’s in the gutter. NPI shares dipped more than 3% on Friday to $38 and change per share — lows not seen since this summer. Though NPI stock isn’t at 2020 lows, the name is down around 24% from its high.
The dividend yield is at a modest 3.11% — well below that of Algonquin’s. Still, the mid-cap green energy play is hard to ignore at these depths as it continues to invest in wind and solar. The stock goes for 15.6 times trailing price-to-earnings (P/E), which is quite low for a $9 billion powerhouse with a world of growth opportunities.
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