Another Headwind: A 3-Letter Word Much Dreaded by Investors

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People all over the world knew in advance about Russia’s plan to invade Ukraine. However, it still came as a shock when Vladimir Putin ordered special military operations against his neighbor. Jens Stoltenberg, secretary general of the North Atlantic Treaty Organization (NATO), condemned the push into Ukraine and called it a “brutal act of war”.

The TSX has been declining since February 16, 2022, due to rising inflation and geopolitical tensions. There are ways to prepare for or curb inflation, but real armed conflict, not a threat, is another kind of headwind. Investors fear war the most because it can cause a sudden stock market crash. Moreover, the impact is indeterminable as long as the battle drags on.

Some market analysts say the approach to a war-induced crash is to look to quality stocks. Telus (TSX: T)(NYSE: TU) and Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) are two. The former provides essential communications services 24 hours a day, 7 days a week, while the latter has endured two world wars.

Vital role in economic growth

Telus has been flat so far in 2022 and has shown no signs of slowing down. The telecommunications stock is doing better than the market as a whole with its gain of 6.1% since the beginning of the year. If you invest today, the stock price is $31.62, while the dividend yield is 4.14%. Unlike CIBC, Canada’s second largest telephone company is not war-tested.

However, the $43.17 billion company’s products and services are vital to government, businesses and families. Telus also benefits from an oligopoly, since it shares control of the telecommunications industry with ECB and Rogers Communications. In May 2021, management announced an additional investment of $17 billion across Ontario through 2024.

Telus will invest the money in infrastructure and operations to support the province through the pandemic and subsequent economic recovery. The company will contribute to the job market and hire 10,000 people to fill positions in construction, engineering and emerging technologies.

In the fourth quarter of 2021, Telus recorded growth of 7.6%, 20% and 145%, respectively, in adjusted EBITDA, consolidated revenue and net income compared to the fourth quarter of 2020. The telecommunications stock has increased its dividend by 7.3% in 2021 and could increase the yield, as of April 2022, by 5.2% compared to the previous year.

Survived the war years

CIBC is the product of a merger between the Canadian Bank of Commerce and the Imperial Bank of Canada. During the war years (WWI and WWII), bank employees enlisted in the armed forces. The $69.68 billion bank is Canada’s fifth-largest lender and, like its larger counterparts in the industry, has a dividend history dating back more than 100 years.

Management announced exceptional results for fiscal 2021, as evidenced by increases of 6.8% and 70%, respectively, in total revenue and net income compared to fiscal 2020. increase in net income (147%).

In early January 2022, CIBC announced its new equipment finance team to expand its specialty banking business in the U.S. commercial banking group to 16. At $160.40 per share, current investors enjoy an 8.6% year-to-date gain on top of the 4.01% gain. dividend.

Deadly Combination

A war in Eastern Europe, combined with the ongoing pandemic and rising inflation, further increases market volatility. The road ahead for Telus and CIBC is bumpy, but both companies could ride out headwinds.

About Jimmie T.

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