The annual contribution room in a Tax-Free Savings Account (TFSA) increased by $6,000 in 2020 — the second straight year that the cumulative contribution room in a TFSA rose by this amount. Valuations are sky-high on the TSX right now, which may give investors pause when it comes to pulling the trigger on a stock.
Today I want to try to ease that apprehension and look at two equities that have provided an attractive blend of capital growth and income over the past decade.
Scotiabank (TSX:BNS)(NYSE:BNS) was outpaced by most of its big banking peers in 2019. Shares have only climbed 2.9% year over year as of close on January 29. I love Scotia’s value right now, and am targeting it as a promising rebound candidate for 2020 and beyond.
This has been dubbed “The International Bank” by many investors because of its large global footprint. Scotia was one of the first banks to release its fourth-quarter and full-year results for fiscal 2019 in late November.
It expects its Canadian Banking segment to be the main source of its strength in the 2020 fiscal year primarily due to improved housing activity and “good levels of business and consumer confidence” according to CEO Brian Porter.
The bank has entered 2020 boasting a fantastic balance sheet and is one of the best bank stocks for those on the hunt for income. Scotia last increased its quarterly dividend to $0.9 per share.
This represents a strong 4.9% yield, the second best among its peer group. The stock last possessed a favourable price-to-earnings ratio of 10.9 and a price-to-book value of 1.4.
Earlier this month I’d discussed why defence stocks were worth targeting to start this decade. The sector saw increased activity as tensions rose between the United States and Iran. Beyond that, defence spending has consistently increased on a global level, hitting a record in 2018. CAE (TSX:CAE)(NYSE:CAE) is a manufacturer of simulation technologies, and defence is a key sector that it services.
Shares of CAE have climbed 43% year over year as of close on January 29. The stock has already increased 15% in 2020 so far. Investors can expect to see its fiscal 2020 third-quarter results early this month.
In the second quarter, the company reported revenue growth of 21% compared to the prior year and its order backlog rose to $9.2 billion.
Its Civil Aviation Training Solutions segment saw revenue rise 35% year over year to $529.9 million. Defence revenue increased 5% to $336.5 million. Income growth in this segment is more heavily weighted in the second half of the fiscal year.
CAE stock is an enticing long-term hold, but it’s a pricey proposition as it hovers around a 52-week high. The stock possessed a P/E ratio of 31 and a P/B value of 4.6 at the time of this writing.
CAE last paid out a quarterly dividend of $0.11 per share, representing a modest 1.1% yield. Value investors should keep CAE on their radar, but they may want to wait for a more attractive entry point going forward.
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 Ambrose O'Callaghan has no position in any of the stocks mentioned. The Motley Fool recommends BANK OF NOVA SCOTIA.