Investing when markets are falling isn’t any simple feat. It takes guts, endurance, and slightly contrarian spirit. But it surely’s additionally the place severe long-term features are made. Whereas many traders flee, those that keep, or higher but, purchase, can choose up helpful property at a reduction. In Canada, two worth shares specifically are beginning to look interesting amid ongoing volatility: Nationwide Financial institution of Canada (Tsx:na) and Baytex Power (TSX:BTE).
Nationwide Financial institution
Let’s begin with Nationwide Financial institution. This smaller Huge Six financial institution usually flies below the radar, however its fundamentals are exhausting to disregard. Whereas different banks are struggling below the load of slower mortgage development and rising defaults, Nationwide Financial institution is holding its personal. In its most up-to-date quarter, the dividend inventory posted income of $2.72 billion and web earnings of $826 million.
Earnings per share (EPS) hit $2.31, in comparison with $2.38 a 12 months earlier. Whereas down barely, the dip got here as provisions for credit score losses elevated to $147 million, up from $85 million. However even with that uptick, Nationwide Financial institution maintained a robust return on fairness of 16.6% and a standard fairness tier-one ratio of 13.5%. These are indicators of a well-capitalized, well-managed financial institution.
The cherry on prime is the dividend. At writing, Nationwide Financial institution pays $4.72 per share yearly, translating to a yield of about 3.36%. With a conservative payout ratio and constant dividend development, it’s a dependable earnings supply. For worth seekers, the financial institution is buying and selling at 13.45 occasions earnings, additional demonstrating its worth. That’s a compelling entry level, particularly when you think about the long-term stability of the Canadian banking sector, even in tough patches.
Baytex
Now, onto Baytex Power. Power shares are likely to get hit exhausting when recession fears rise, and Baytex isn’t any exception. However whereas the dividend inventory has seen strain currently, the enterprise is much from damaged. In actual fact, it’s quietly pumping out money. Baytex reported adjusted funds circulation of $464 million in its first quarter of 2025, with web earnings coming in at $70 million. The dividend inventory generated free money circulation of $53 million, even in a weaker oil value setting. It’s additionally persevering with to return money to shareholders, with $30 million distributed by buybacks and dividends within the quarter.
Manufacturing averaged 144,194 boe/day, with 84% from oil and pure fuel liquids. This numerous base, together with property in Alberta and Texas, provides flexibility and scale. Whereas oil costs stay unstable, Baytex hedged about 45% of its oil publicity for the remainder of the 12 months, serving to to stabilize income.
And whereas the dividend may not leap off the web page at $0.09 yearly, it’s sustainable, and there’s potential for development. The actual worth lies within the dividend inventory’s extremely low valuation. At writing, Baytex trades at 6.4 occasions earnings. Talking of the steadiness sheet, Baytex has made significant progress. Internet debt now sits at $2.39 billion, down about $250 million 12 months over 12 months. The dividend inventory goals to allocate 100% of its free money circulation to debt compensation till circumstances enhance. That’s a sensible, disciplined strategy in at this time’s macro setting.
Backside line
Whenever you put these two shares collectively, you could have a financial institution with regular earnings and a cyclical oil inventory with excessive upside. Shopping for worth doesn’t at all times really feel good within the second. However should you can look previous the short-term noise, Nationwide Financial institution and Baytex Power provide compelling alternatives.
When markets fall, feelings rise. That’s when good shares begin occurring sale. As a substitute of panicking, long-term traders can lean into high quality. Nationwide Financial institution and Baytex Power match the invoice. They’re not with out threat, however the upside may very well be nicely value it.