Here’s Why Canopy Growth (TSX:WEED) Stock Belongs With TD Bank (TSX:TD) in a Portfolio

Stacking Canopy Growth Corp. (TSX:WEED)(NYSE:CGC) shares alongside the classic mix of banks and utilities could be the future.

edit Business accounting concept, Business man using calculator with computer laptop, budget and loan paper in office.

Image source: Getty Images

Let’s take a look at one of the leading Canadian marijuana producers and see why new investors and seasoned veterans alike should pair it with what is arguably Canada’s biggest Bay Street banker. We’ve thrown in a couple of other “big deals” for this hypothetical mini-portfolio, tailor made for bold investors in the TSX index.

Canopy Growth (TSX:WEED)(NYSE:CGC)

This is arguably the one cannabis stock that deserves to be on a low-risk investor’s watch list, no matter whether they’re a bull or a bear on the green stuff. Its interest in acquiring Acreage Holdings Inc. post-legalization in the U.S. marks one of the biggest potential game changers in the cannabis space, and puts Canopy Growth front and centre of Canadian marijuana’s Big League.

Up 11.58% in the last five days at the time of writing and with yearly returns of 98.7%, Canopy Growth is an outperforming ticker to watch. With a beta of 3.86 relative to the market, and selling at over five times its future cash flow value, Canopy Growth has all the momentum a capital gains investor might want. It’s fairly good value for a cannabis stock, with a P/B of 2.8 times book, and with an 86.5% expected annual growth in earnings, it’s a solid option for high growth investors.

Toronto-Dominion Bank (TSX:TD)(NYSE:TD)

TD Bank is up 2.81% over the last five days, and like Canopy Growth it can sock it to its peers: see TD Bank’s returns of 7.9% that beat the Canadian banking average for the past 12 months. Its track record is solid for a banker, with a one-year past earnings growth of 10.6% matching the Canadian banking average for the year, while its five-year average past earnings growth of 10.1% is a couple of percentage points higher than the industry for the same period.

An interesting statistic to look at with banking is return on assets (ROA); TD Bank’s ROA for the past year was 1%, which, minimal as it is, beats the Canadian banking average of 0.8% for the same period. Combined with good value (see a 35% discount off its future cash flow value, P/E of 12.5 times earnings and P/B of 1.8 times book), this makes for a solidly positioned stock.


Up 3.7% in the last five days at the time of writing, Nutrien is a remarkable TSX Index stock that straddles mining, materials, and agriculture all in one investment, all while providing upward momentum to capital gains investors. Indeed, with its beta of 1.73 relative to the chemicals industry and 37% expected rise in earnings, Nutrien is shaping up to be a suitable stock for momentum investment.

Nutrien’s one-year returns of 21.3% beat the Canadian chemicals industry average of 13.9%, which itself outperformed the market more than three times over. A healthy and decently valued stock (see a debt level of 37.8% of net worth and P/B of 1.3 times book for respective stats), Nutrien would round out an investment in cannabis and financials, while adding a dividend yield of 3.18%.

The bottom line

Stacking Canopy Growth shares alongside the classic mix of banks and dividend-paying materials could be the future. TD Bank’s stable dividend yield of 3.91%, matched with a 9.7% expected annual growth in earnings provides the passive income needed to balance out a cannabis investment in a low-risk TSX Index stock portfolio.

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 Victoria Hetherington has no position in any of the stocks mentioned. Nutrien is a recommendation of Stock Advisor Canada.

More on Dividend Stocks

A close up image of Canadian $20 Dollar bills
Dividend Stocks

How Much Cash Do You Need to Quit Work and Live Off Dividend Income

Toronto-Dominion Bank (TSX:TD) pays a lot of dividend income. Can you live off of it in retirement?

Read more »

An analyst uses a computer and dashboard for data business analysis and Data Management System with KPI and metrics connected to the database for technology finance, operations, sales, marketing, and artificial intelligence.
Dividend Stocks

Invest $10,000 in This Dividend Stock for $1,398.40 in Passive Income 

This dividend stock offers a whopping 11.9% dividend yield right now, with returns that should fly high for this cyclical…

Read more »

Person holds banknotes of Canadian dollars
Dividend Stocks

This 6.1 Percent Dividend Stock Is My Pick for Instant Income

Here’s what makes Transcontinental one of my top dividend stock picks right now for instant income.

Read more »

Pile of Canadian dollar bills in various denominations
Dividend Stocks

For a Shot at $5,000/Year in Passive Income, Buy 1,000 Shares of This TSX Stock

Do you know you can build passive income with TSX stocks? A $22,000 investment can give you a shot at…

Read more »

Paper Canadian currency of various denominations
Dividend Stocks

Beat the TSX With This Cash-Gushing Dividend Stock

A new Canoe EIT Income Fund (TSX:EIT.UN) investment could earn almost 9% yield annually, and the monthly dividend stock has…

Read more »

RRSP (Registered Retirement Savings Plan) on wooden blocks and Canadian one hundred dollar bills.
Dividend Stocks

RRSP Wealth: 2 Great Dividend Stocks to Own for Total Returns

Dividend stocks like Fortis Inc (TSX:FTS) can be great additions to a well-diversified portfolio.

Read more »

edit Sale sign, value, discount
Dividend Stocks

3 Cheap Stocks to Add to Your TFSA Before They Get Expensive

The stock market has some lucrative TFSA stocks trading at multi-year lows. Now is a good time to buy these…

Read more »

Hour glass and calendar concept for time slipping away for important appointment date, schedule and deadline
Dividend Stocks

How to Build a Bulletproof Monthly Passive-Income Portfolio With Just $10,000

Here’s how to build a diversified portfolio with dividend stocks that, as a group, pay out in every month of…

Read more »