BCE Inc. (TSX: BCE, NYSE: BCE)

Dividend Yield: 4.7%    Recent Price: C$58/US$44   Fair Value: C$71/US$54

BCE remains one of our best ideas for new money. And it’s also the top holding in our Dividend Champions Portfolio—a position that’s well deserved given the telecom giant’s outstanding history as a profitable operator.

BCE holds a dominant position in the Canadian telecommunications industry. As part of the oligopoly that controls the country’s wireless market, its growth opportunities are limited. Nevertheless, the company continues to find ways to generate growth organically and via acquisition.

The stock yields an attractive 4.7%, and the relatively safe dividend is expected to continue growing by 5% annually for the foreseeable future. The stock has been hurt by expectations of higher interest rates, but we believe it continues to offer a compelling value.

K-Bro Linen Inc. (TSX: KBL, OTC: KBRLF)

Dividend Yield: 2.8%    Recent Price: C$42/US$32   Fair Value: C$46/US$35

K-Bro Linen reported disappointing third-quarter results as the benefits of the 3sHealth contracts and the new Regina plant were offset by a jump in operating expenses. Earnings per share decreased by 10% compared to last year, while the dividend was left unchanged.

The company is in the process of a multi-year plant renewal and expansion program, which negatively impacts profit margins. However, profit growth should accelerate strongly after the new Vancouver facilities are completed in 2018.

The balance sheet is in excellent shape, and cash flow from operations is healthy. The dividend is well covered, with a payout ratio of 46% of distributable cash flow.

Although the cost of building the new facilities is material, these investments should eventually lead to higher margins and profitability.

The stock currently trades at an enterprise value to EBITDA (earnings before interest, taxation, depreciation and amortization) ratio of 11 times, which is a discount to its main peers. Our fair-value estimate is C$46, or US$34.

Power Corporation of Canada (TSX: POW, OTC: PWCDF)

Dividend Yield: 4.5%    Recent Price: C$31/US$23   Fair Value: C$33/US$25

Power Corporation is a family-controlled holding company with major investments in life and health insurance and wealth management operations. Among the firm’s key assets are indirect investments in publicly listed companies Great-West Lifeco and IGM Financial.

Insurance accounts for 70% of profits, with roughly equal contributions from operations in Canada and Europe, while the U.S. makes a meaningful, but relatively smaller contribution.

The overall business has performed well over the long term. The company’s net asset value and dividend per share have both grown by 7% annually over the past decade, while return on equity has averaged slightly more than 10%. This constitutes a very credible performance during a period that includes the Global Financial Crisis.

Investors have ignored the stock for some time now, and it barely participated in the recent rally of insurance stocks. But savvy investors who buy Power Corp. now are getting a stock that trades at a 35% discount to the value of the firm’s underlying assets, as well as an attractive yield of 4.5%.

AirBoss of America (TSX: BOS, OTC: ABSSF)

Dividend Yield: 2.0%    Recent Price: C$13/US$10   Fair Value: C$17/US$13

AirBoss is one of the largest rubber compounding and specialized rubber product manufacturers in North America. It serves customers in a variety of industries including mining, energy, defense, and auto manufacturing.

The company has performed well over time, but struggled over the past year as key customers in the mining and energy sectors cut costs. Investors took note and knocked the share price down by 50% from its all-time high in August 2015.

Although poor business conditions may continue through the first half of 2017, we believe that the stock’s current valuation, which is well below its historical average and at a substantial discount to its peers, will eventually prove to be an excellent entry point.

Additionally, AirBoss has done a great job of growing its dividend. The payout has risen 12.3% annually over the past five years, though dividend growth has slowed a bit more recently given the difficult operating environment. Nevertheless, future payments are reasonably secure given the firm’s low payout ratio, strong balance sheet, and adequate cash flow.

The stock currently yields 2.0%, which is somewhat below our preferred range, but we expect strong dividend growth beyond 2017. We estimate a fair value of C$17, or US$13.