3 Stocks to Buy as the Canadian Dollar Drops

Stocks such as Canadian Pacific Railway Limited (TSX:CP)(NYSE:CP) could see a boost as the Canadian dollar plunges.

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The Canadian dollar has settled below the $0.80 mark since mid-October and may continue to experience downward pressure as the U.S. Federal Reserve looks ready to hike rates in December. The Bank of Canada has turned a dovish corner after its October 25th decision to hold the benchmark rate at 1%. With record-high Canadian household debt and the uncertain situation with NAFTA, the Canadian central bank is erring on the side of caution.

Let’s take a look at three stocks that could turn bullish if the Canadian dollar settles lower, as we come to the end of the calendar year.

Canadian Pacific Railway Limited (TSX:CP)(NYSE:CP) is a Canadian freight company that provides transportation, logistics solutions, and supply chain expertise in North America. Shares of CP Rail have climbed 15% in 2017. The company released its third-quarter results on October 17. Revenue rose 3% to $1.55 billion and operating income increased 5% to $690 million.

In a late September article, I focused on the trajectory of Canadian rail stocks and listed CP Rail and others as an “enticing buy.” CP Rail stock plunged from over $210 at the time of the July 12th Bank of Canada rate hike to below $190 in late August. Although the central bank elected to raise rates again on September 6, Governor Stephen Poloz struck a cautious tone. That message, coupled with positive earnings projections, catapulted CP Rail stock back above $200 by late September.

The stock offers a dividend of $0.56 per share with a 1% dividend yield.

Stella-Jones Inc. (TSX:SJ) is a Quebec-based company that manufacturers and treats wood products. Shares of Stella-Jones have climbed 13.8% in 2017 as of close on November 13 and 18% year over year. Many of the products that Stella-Jones manufacturers, including utility poles and railway ties, are exported to the United States.

Stella-Jones released its third-quarter results on November 3. Sales increased 1% to $517.6 million compared to $512.6 million in the third quarter of 2016. Railway tie sales represented $160.8 million, and utility pole sales were reported at $172.5 million — a 7.8% increase from last year. A lower Canadian dollar should help boost sales heading into the fourth quarter.

The stock offers a modest dividend of $0.11 per share, representing a 0.9% dividend yield.

CCL Industries Inc. (TSX:CCL.B) is a Toronto-based specialty packaging company that provides packaging products to a broad range of industries. Shares of CCL Industries have increased 11.8% in 2017 and 29% year over year. The company has over 100 manufacturing facilities across North America, Europe, Asia, and other continents. Many of its profits are generated by leveraging a lower loonie relative to importers.

CCL Industries released its third-quarter results on November 8. Sales jumped 10.8% with 4.6% organic sales growth. Net earnings climbed to $106.9 million in comparison to $86.2 million in the third quarter of 2016.

The stock provides a dividend of $0.12 per share with a 0.8% dividend yield.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Ambrose O'Callaghan has no position in any stocks mentioned. CCL Industries is a recommendation of Stock Advisor Canada.

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