It’s easy to hold a stock when business is thriving and the share price is rising, but staying invested becomes much harder when earnings disappoint, sentiment weakens, and investors begin questioning the company’s future. Still, market pullbacks are often when long-term Foolish investing becomes most rewarding. Companies with valuable assets, consistent cash flow, and disciplined management could turn today’s uncertainty into a future opportunity.
In this article, I’ll highlight two Canadian dividend stocks that seem to have fallen out of favour lately and why patient investors may want to consider buying them right now.
Telus stock
For investors who can look beyond short-term uncertainty, TELUS (TSX:T) could offer an attractive recovery opportunity after its sharp decline.
The Canadian communications technology giant provides wireless, broadband, health, and digital services. The stock ended July 2026 at $13.38 per share, giving it a market cap of $21.1 billion and an annualized dividend yield of 5.6%. TELUS shares have fallen about 40% over the last year and 26% so far in 2026, making it look undervalued based on its long-term growth prospects.
The market’s concerns are easy to understand because TELUS has faced intense pricing competition, slower subscriber demand, weaker financial guidance, and a major dividend reset. Recently, the company reduced its annualized dividend to $0.75 per share from $1.67. That cut hurt the stock, but the move is expected to help save the company about $2.7 billion through 2028.
The Canadian telecom firm’s latest quarterly results clearly showed why its management felt a reset was necessary. Its consolidated service revenue slipped 1% year over year (YoY) in the second quarter to $4.4 billion. Similarly, its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) fell 2% to $1.8 billion.
On the brighter side, TELUS generated $1.3 billion from operating activities, up 15% YoY. Free cash flow also rose 2% from a year ago to $545 million despite lower adjusted EBITDA and higher interest payments.
More importantly, TELUS now wants to reduce its net debt-to-adjusted EBITDA ratio to about three times or lower by the end of 2028. It plans to get there through disciplined capital spending, lower capital intensity, asset sales, and continued investment in wireless, fibre, and artificial intelligence (AI) infrastructure.
While TELUS might not look like a stable income stock right now, its lower share price may appeal to many value investors who believe the company could turn stronger cash flow and lower debt into a more durable business over the next few years.
MTY Food Group stock
MTY Food Group (TSX:MTY) could be another attractive stock after its recent pullback. The business is still under pressure, but its cash generation remains solid, and its management is taking direct action on one of its biggest problems.
This Montreal-based company franchises and operates quick-service, fast-casual, and casual-dining restaurants across more than 80 brands. After sliding 11% over the last year despite a broader market rally, MTY stock currently trades at $34.25 per share with a market cap of about $783 million and an annualized dividend yield of 4.3%.
Soft consumer spending, weaker restaurant sales, and lower profitability at corporate-owned stores have weighed on the stock. In the second quarter, MTY’s revenue fell 8.2% YoY to $279.9 million. Nevertheless, it still managed to generate $43 million from operating activities, up 25% YoY. Similarly, the company’s free cash flow after lease payments climbed to $32.2 million from just $17.8 million a year ago.
MTY’s management now plans to close 68 underperforming corporate locations that produced combined losses of more than $10 million over the last 12 months. The closures will create short-term costs, but removing weaker stores should leave the company with a healthier and more profitable portfolio.
Meanwhile, MTY is also repaying debt, building its store-opening pipeline, and using data and AI to improve customer engagement.
Which dividend stock looks better to buy now?
Between these two stocks, MTY currently offers the clearer path to near-term improvement. TELUS may have more turnaround upside, but MTY combines a solid dividend yield, strong cash flow, and a focused plan to remove weaker assets. For patient investors, that could make MTY’s recent pullback a useful entry point.
