Let’s be honest here, would any of us have imagined that 2021 would turn out to be one of the best years to invest in the past decade? I’m an eternal bull as I see opportunities everywhere, but I didn’t expect this year to be this profitable. Between 2019 and November 2021, the S&P 500 nearly doubled in value again! Unfortunately, a significant part of this growth took place outside of the dividend world.
More than Ever, Stay Invested
I repeat that all the time, but if 2021 taught us anything, it’s that nobody knows how the market will react. Those still waiting on the sidelines are now banging their head against the wall. After all, you may have been waiting for a market crash, but the more it goes up, the fewer chances you will have to pick bargains. Yes, stocks’ prices will drop at one point or another, but they may never go back to their 2020 value. Here’s a quick guide on how you can start investing your liquidity:
- Identify sectors you want to invest in (review each sector’s strength).
- Build a buy list using our Mike’s Buy List, our newsletter, and our stock screener.
- Invest 1/3 of your money now.
- Wait another quarter to get more information on each company and read their next quarterly earnings. This will also protect your money if there is a market crash in the next three months.
- Wait another quarter to invest the rest of your money (same rationale as step #4).
In general, market crashes will drop for 3-6 months before going sideways. By waiting 3 months and another 3 months to invest your money, you will average down your position if we hit a market crash in the coming months. On the other hand, if we don’t suffer that crash, you will have money riding the market creating a cushion for the next crash.
Here are some great stock ideas for 2022:
- Market cap: 3B
- Yield: 1.55%
- Revenue growth (5yr, annualized): 16.50%
- EPS growth rate ((5yr, annualized): 40.75%
- Dividend growth rate (5yr, annualized): 35.10%
goeasy Ltd. is a Canada-based company that provides non-prime leasing and lending services. The Company is engaged in providing loans and other financial services to consumers, and leasing household products to consumers. It operates in two segments: easyfinancial and easyhome. The easyfinancial segment lends out capital in the form of unsecured and secured consumer loans to non-prime borrowers. Its product offering consists of unsecured and real estate secured installment loans. The segment also includes the LendCare operating segment, which specializes in financing consumer purchases in the powersports, automotive, retail, healthcare, and home improvement categories. The easyhome segment provides leasing services for household furniture, appliances and electronics and unsecured lending products to retail consumers. The Company operated approximately 286 easyfinancial locations (including 6 kiosks within easyhome stores) and over 158 easyhome stores (including 34 franchises).
I was highly skeptical about goeasy for a long time. I didn’t think GSY could compete with banks (you know my love for National Bank, right?) and do well even when the tide turned. goeasy has been growing at an impressive pace and has proven that it can manage its way through troubled waters. The company survived the credit crunch and had since expanded its activities. When you look at its dividend triangle, you’ll discover the source of its power. The company has a highly effective underwriting process and has reported growth quarter after quarter. With a national footprint of over 400 branches and stores across Canada and digital eCommerce enabled platforms, GSY is everywhere credit is needed in Canada. My bet is that the Canadian economy will continue to expand in 2022 and GSY (along with other banks) will be a big winner.
If you still prefer banks, you can watch my end-of-year Canadian banks review here.
Open Text (OTEX.TO)
- Market cap: 24B
- Yield: 1.95%
- Revenue growth (5yr, annualized): 12.40%
- EPS growth rate ((5yr, annualized): -27.05%
- Dividend growth rate (5yr, annualized): 12.60%
Open Text Corporation is a Canada-based information management company that provides software and services. The Company offers an integrated portfolio of Information Management solutions delivered at scale in the OpenText Cloud, enabling organizations to optimize their digital supply chains. Its Content Services solutions range from content collaboration and intelligent capture to records management and archiving, and are available off-cloud, on a cloud provider, as a subscription in the OpenText Cloud, in a hybrid environment or as a managed service. Its Content Services solution enables customers to capture documents and data from paper, electronic files, and other sources and transform it into digital content delivered directly into enterprise content management solutions and business processes. The Company’s Information Management platform and services provide scalable solutions for global companies, small and medium-sized businesses (SMB), Governments and consumers.
The dividend tech space is rather small in Canada. Our stock screener only counts 8 companies including 5 dividend growers. Tecsys (TCS.TO) is another of my favorites, but it is quite volatile. For those reasons, I’ve decided to go with a “safer play” in Open Text. OTEX isn’t as impressive as it was 10 years ago, but it shows many characteristics I appreciate. It is all about recurring revenues and diversification (over 100,000 customers). The hype has diminished around OTEX mostly due to a lack of “exciting” acquisitions over the past few years. This is the type of company that shows a relatively mature business model (read low single-digit organic growth) but can bolster its profile through acquisitions in a highly fragmented market. Speaking of which, OTEX announced the acquisition of Zix Corp for $860M a few days after their earnings report. Zix is a leader in SaaS-based email encryption, threat protection and compliance cloud solutions for Small and Medium-sized Businesses (SMBs). There is a natural cross-selling opportunity here. OTEX now counts on over 40% of its revenue coming from its cloud services and subscriptions. As dividend investors, we love those recurring revenues!
Find out about 6 companies that will crush 2022
Each year, I compile a list of stocks that are expected to do better than the market for Dividend Stocks Rock members. This year, I’ve reviewed the 11 sectors for them and included top picks for each. I’ve decided to share two of them with you: REITs and Utility.
You can download 6 of my top 22 for 2022 right here: