5 Top Stocks for Your Starter Portfolio

A well-rounded, diversified starter portfolio includes top stocks such as CGI Group Inc. (TSX:GIB.A)(NYSE:GIB).

Beginning an investment portfolio is an overwhelming task at any age. The questions that one must answer, or at least have an informed opinion about, are endless.

Which areas of the market are most attractive at this point in time? Within these industries, which companies are the most attractive? What is more important; growth or valuation? What is the healthy trade-off between the two? And lastly, how much of the portfolio should we keep in cash?

Here are five top stocks to put in the equity portion of the portfolio.

Dividend stocks belong in every portfolio, and with National Bank of Canada (TSX:NA), we get a 3.76% yielder that has big exposure to rising interest rates and a restructuring program that has seen significant efficiency gains.

The company’s efficiency ratio improved by 230 basis points in the last quarter, and its ROE was 18.3%. The company’s ROE was 15.5% in 2016, so the improvement is clearly massive. We can expect this year to see more of the same, as the bank continues to close the gap between it and the more established banks, such as Canadian Imperial Bank of Commerce.

With $10.8 billion in revenue, CGI Group Inc. (TSX:GIB.A)(NYSE:GIB) is Canada’s largest Information Technology (IT) services firm. The company has and will continue to grow by consolidating the industry and by growing organically, as the IT services industry is a growth industry.

At this point in time, CGI still has a big opportunity to continue along its growth trajectory, with a focus on higher-margin business further increasing the company’s margins over time. In the latest quarter, adjusted EBIT margins were over 15%. This is a long way from margins of under 10% only four year ago.

Agnico Eagle Mines Ltd. (TSX:AEM)(NYSE:AEM) stands to benefit from a shift in investor sentiment toward more stable, risk-averse investments such as gold. That’s in addition to its operational excellence, solid growth profile, and attractive valuation.

Canadian Natural Resources Ltd. (TSX:CNQ)(NYSE:CNQ) is special, because it offers a long-life, low-decline portfolio, and oil and gas assets that have given the company a predictable and reliable stream of cash flow with little reserve-replacement risk.

This means investors get exposure to the sector’s upside, while mitigating the downside risk.

Finally, we have Enbridge Inc. (TSX:ENB)(NYSE:ENB), a pillar of stability, reliability, and capital preservation.

Since 1996, investors have enjoyed 22 years of dividend increases, with a 33% dividend increase in 2015, a 14% increase in 2016, and a 15% increase expected in 2017. And management expects the dividend to increase at a 10-12% cumulative average growth rate from 2017 to 2024.

Lastly, there’s the question of cash. Personally, I am keeping a greater than normal amount of my portfolio in cash, as I believe that there will be market weakness in the near term and better deals ahead.

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 Karen Thomas owns shares of Canadian Natural Resources, CDN NATURAL RES, and CGI GROUP INC CL A SV. The Motley Fool owns shares of Enbridge. CGI Group and Enbridge are recommendations of Stock Advisor Canada.

More on Dividend Stocks

Two seniors float in a pool.
Dividend Stocks

TFSA: How to Earn $1,890 in Annual Tax-Free Income

Plunk these investments into your TFSA to earn passive income and avoid the taxman.

Read more »

Engineers walk through a facility.
Dividend Stocks

1 TSX Stock I Wouldn’t Touch With a 10-Foot Pole

AtkinsRéalis (TSX:ATRL) is one TSX stock I'd never invest in.

Read more »

edit Woman in skates works on laptop
Dividend Stocks

3 No-Brainer Stocks to Buy Under $30

These three stocks all offer a huge deal for investors looking for dividends, as well as growth that will last.

Read more »

You Should Know This
Dividend Stocks

How to Convert a $300 Monthly Investment Into $338 in Monthly Income

If you want a certain amount in monthly passive income, invest a similar amount today and leave the rest to…

Read more »

Increasing yield
Dividend Stocks

3 Income Stocks With Big Yields to Consider in April 2024

If you haven’t yet made your March investments, here are three income stocks to buy the dip and lock in…

Read more »

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Dividend Stocks

RRSP Investors: Don’t Miss Out on This Contribution Hack!

This hack has so many benefits for you -- not just when you put it in your RRSP but for…

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

Passive Income: 2 Safe Dividend Stocks to Own for the Next 10 Years

Dividend stocks such as Manulife and Fortis can help you generate a stable and recurring passive-income stream.

Read more »

Young woman sat at laptop by a window
Dividend Stocks

3 Dividend Stocks Everyone Should Own for the Long Haul

For investors looking for top-tier dividend stocks to buy and hold for the long term, here are three of my…

Read more »