Hi, Fools. I’m back to call your attention to three attractive mid-cap stocks — or, as I like to call them, my top “sweet spot” stocks. As a reminder, I do this because mid-cap companies — those with a market cap of between $2 billion and $10 billion — have two key features:
- more upside potential than large “blue-chip” companies; and
- less downside risk than speculative small-caps.
In other words, if you want to become a millionaire over the next several decades, mid-cap stocks offer a reasonable way to do it.
Let’s get to it.
Walk in the park
Leading things fuel refiner and distributor Parkland Fuel (TSX:PKI), which has a market cap of about $6.3 billion.
Parkland continues to use its unmatched scale (1,855 retail gas stations), hefty cash flows, and strong management team to deliver the goods for shareholders. In the most recent quarter, for instance, distributable cash flow increased by $17 million to $156 million. For dividend seekers, that translates into a highly comforting dividend-payout ratio of 29%.
“The strength of Parkland’s diverse portfolio and integrated assets was on full display in the second quarter, driving outstanding results,” said CEO Bob Espey. “Our International, USA and Supply segments underpinned our performance, and we also benefited from further synergy capture including early wins within Sol.”
Parkland shares are up 21% so far in 2019.
Stan and deliver
Stantec’s leadership position in the design space (top three in North America and top 10 in the world), fiscal discipline, and proven track record are all good reasons to keep an eye on the stock. In 2018, the company posted organic gross revenue growth of 3.3%, adjusted earnings growth of 5%, and ended the year with a backlog of $4.2 billion.
“We are focused on building the engine of the organization that will convert our record-high backlog into revenue while continuing to grow our business,” said CEO Gord Johnston in the most recent quarterly report.
Stantec shares are down about 7% over the past three months.
Rounding out our list is renewable power company TransAlta Renewables (TSX:RNW), which currently sports a market cap of $3.5 billion.
The shares underperformed significantly in 2018, but 2019 continues to be a strong comeback year for TransAlta. In the most recent quarter, revenue grew 3.7% to $111 million, EBITDA increased 13% to $11 million, and distributable cash improved $6 million to $57 million.
“We are excited to continue this growth plan with the upcoming commissioning of two additional US wind projects later this year and continue to be focused on adding new accretive projects to the fleet,” said President John Kousinioris.
TransAlta shares are up 29% in 2019 and offer a rather juicy dividend yield of 7%.
The bottom line
There you have it, Fools: three attractive mid-cap stocks worth checking out.
As always, they aren’t formal recommendations. View them, instead, as a jumping-off point for further research. Even the best mid-cap stocks can face serious trouble from time to time, so plenty of due diligence is still required.
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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 Brian Pacampara owns no position in any of the companies mentioned.