The TSX index has some overlooked gems for the risk-averse dividend investor, with an attractive mix of low market fundamentals, growth in earnings, and clean balance sheets. While few single stocks exhibit all of these characteristics, now and then a great value investment, or a ticker with unexpected upside, comes along to reaffirm one’s faith in the stock market.
Below you will find three Canadian super-stocks that just might do exactly that. From construction to telecoms to finance, here is a small cross-section of the best that the TSX index has to offer when it comes to defensive dividends in relatively “safe” industries.
Badger Daylighting (TSX:BAD)
With a one-year past earnings growth of 80.2%, this cornerstone of Canadian construction handily beat its own five-year average past earnings growth of 9.2% with a great 12 months. That pattern is set to continue, too, with a 13.6% expected annual growth in earnings – perfect for a passive income portfolio or TFSA.
Badger Daylighting is a great choice for an RRSP, too, with a last-year ROE of 21% that’s significantly high for the TSX index and acceptable debt level of 27.3% of net worth. A large volume of shares changed hands in the last three months through inside buying – considerably more than through inside selling –thus rounding out a snapshot of a stock you can buy and hold confidently.
Looking at a generally upward trend since last November, but with some considerably deep troughs, it would appear that this stock is in a dip and could climb later in the year. Valuation could be better, with a P/B of 3.7 times book, though a P/E of 17.4 times earnings isn’t bad. At the end of the day, a dividend yield of 1.53% is the main reason to buy.
A one-year past earnings growth of 16.3% lags the North American telecom industry average of 102.5% for the same period, although it beats its own 0.8% five-year average. An 8.3% expected annual growth in earnings matched with a dividend yield of 4.73% is the main reason to buy TELUS, though it may be an idea to check out TSX index competitors in this space, as a high debt level of 140.8% of net worth and slightly overheated P/B of 2.8 times book give pause for thought.
Manulife Financial (TSX:MFC)(NYSE:MFC)
Trading at its book price, Manulife Financial has a P/E of 17.1 times earnings, which is only a little over the industry average. With a generally downward trend in share price since the start of 2018, with some pronounced peaks and troughs, Manulife Financial stock was up 1.15% in the last five days. All told, it’s a fairly sluggish stock, with a five-year beta of 1.2 relative to the market.
That’s not a bad thing when it comes to casual investing. And if it’s passive income you’re after, a tasty dividend yield of 4.76% pairs nicely with a 12.8% expected annual growth in earnings. All in all, this is one of the most accessible of financial stocks on the TSX index, and its share price is discounted by 45% compared to its future cash flow value.
The bottom line
A possible value opportunity exists in Badger Daylighting, with investors being handed a chance to catch some upside later in the year. Indeed, the stock is down 3.64% in the last five days, meaning that now may be a good time to stack shares in this TSX index construction superstar. Meanwhile, TELUS is well positioned in its industry, and Manulife Financial is a great all-rounder on multiples, growth, and dividends.
