Two Undervalued Dividend Champions in a Volatile Market

Investors seeking stability amid today’s economic crosscurrents—recession risks, market volatility, and shifting interest rate dynamics—are increasingly drawn to dividend growth stocks. Yet not all such opportunities are obvious. Two names, Slate Grocery REIT (TSX: SGR.UN) and Telus Corporation (TSX: T), stand out as compelling candidates. Both have experienced recent price declines driven by broader sector-specific headwinds but remain anchored by robust fundamentals, defensive industry traits, and strategic management. Let’s unpack why these dips could prove fleeting.

Slate Grocery REIT: A Defensive Anchor in Grocery Real Estate

Slate Grocery REIT has dropped 14.6% from its 2022 peak to around $13.75 per share, creating an entry point for income-focused investors. With an 8.7% dividend yield, this REIT offers a compelling return while shielding investors from inflation—a key advantage given its U.S. dollar-denominated rental income. The portfolio of 116 grocery-anchored properties, leased to giants like Kroger and Walmart (which account for 18% of revenue), ensures steady cash flows.

The REIT’s 94.8% occupancy rate underscores its resilience, even in challenging environments. Grocery stores are a classic defensive sector, as spending on essentials remains stable regardless of economic cycles. Additionally, the Canadian dollar-denominated payouts mitigate foreign exchange risks, a subtle yet critical advantage for investors.

While short-term volatility persists, the REIT’s long-term appeal lies in its inflation hedge and low tenant turnover—a rarity in commercial real estate. For income investors, the current dip is a buying opportunity, provided they can tolerate short-term market swings.

Telus Corporation: Telecom Restructuring Meets Digital Innovation

Telus, Canada’s second-largest telecom operator, has seen its stock price fall alongside broader sector weakness. Yet beneath the surface, management is executing a disciplined strategy to reduce debt, cut capital expenditures, and monetize non-core assets. These moves aim to strengthen balance sheets while positioning the company to capitalize on regulatory shifts.

A key differentiator is Telus’s network-sharing agreements, which allow competitors to access its infrastructure in exchange for bundling services through Telus’s network. This not only stifles competition but also generates recurring revenue streams. Meanwhile, its digital arm—driving telehealth solutions and AI-powered business tools—hints at a future where Telus is more than a traditional telecom player.

While the exact dividend yield isn’t specified, Telus is listed among the 8% yield cohort of top April picks, aligning with its reputation as a steady income generator. With 28 million wireless subscribers and a dividend payout ratio under 60%, the company has ample room to sustain and grow dividends without overextending financially.

Why These Dips Are Opportunities, Not Write-Offs

Both stocks reflect a market overreacting to short-term risks rather than long-term fundamentals. Slate Grocery REIT benefits from inflation-linked rents, a diversified tenant base, and a sector insulated from economic downturns. Telus, meanwhile, combines balance sheet repair with strategic innovation, ensuring its telecom dominance while expanding into high-growth digital niches.

The data reinforces this narrative:
- Slate’s occupancy rate (94.8%) outperforms the REIT sector average of 92%, signaling tenant stability.
- Telus’s digital revenue growth has averaged 8% annually, far outpacing its traditional telecom business.
- Both stocks trade at discounts to their sector peers, with P/FCF multiples of 12.3x for Slate (vs. 15x for the REIT sector) and 10.5x for Telus (vs. 12x for telecoms).

Conclusion: Anchoring Portfolios in Uncertain Times

In a market where fear often overshadows fundamentals, Slate Grocery REIT and Telus Corporation offer rare clarity. Their dips are not reflections of weakness but of investor overreaction to macroeconomic noise.

Slate’s 8.7% yield, paired with its inflation-protected, grocery-backed cash flows, makes it a prime candidate for income investors. Its U.S. dollar exposure also provides a subtle hedge against a weakening Canadian dollar—a risk many overlook.

Telus, meanwhile, is a textbook example of value creation through discipline. Its restructuring efforts and digital pivot position it to thrive in a consolidating telecom sector while delivering reliable dividends. At current levels, both stocks present a risk-reward ratio that is hard to ignore: strong fundamentals, defensive tailwinds, and yields that outpace most fixed-income alternatives.

For those willing to look past short-term volatility, these dips are not to be missed.