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.
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.
Just one ticking time bomb in your portfolio can set you back months – or years – when it comes to achieving your financial goals. There’s almost nothing worse than watching your hard-earned nest egg dwindle!
That’s why The Motley Fool Canada’s analyst team has put together this FREE investor brief, including the names and tickers of 3 TSX stocks they believe are set to LOSE you money.
Stock #1 is a household name – a one-time TSX blue chip that too many investors have left sitting idly in their accounts, hoping the company’s prospects will improve (especially after one more government bailout).
Still, our analysts rate this company a firm SELL.
Don’t miss out. Click here to see all three names right now.
Fool contributor Victoria Hetherington has no position in any of the stocks mentioned. Badger is a recommendation of Stock Advisor Canada.