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Canadian Investors: 2 Stocks to Buy Amid Volatile Markets

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Interestingly, very few stocks stayed strong, as broader markets witnessed some of the tumultuous sessions last week on coronavirus fears. While this fall could be seen as an opportunity, one should be equally careful as the impact of coronavirus could be beyond anyone’s guess.

Here I present you two stocks that remained fairly strong last week when the S&P 500/TSX Composite Index fell almost 10%. Canadian stocks MTY Food Group (TSX:MTY) and Rogers Communication (TSX:RCI.B)(NYSE:RCI) fell only 2% and 4%, respectively, in the same period.

The recent dip severely hit almost all the broad market sectors and stocks. Thus, this outperformance by MTY and Rogers is indeed notable. Just because these stocks stayed relatively strong last week, it would not be prudent to assume the same for the next broad market weakness.

MTY Food Group

Montreal-based MTY Food Group franchises and operates quick-service restaurants primarily in Canada and North America. The company has managed to grow its revenues and profits at a rapid pace in the last few years.

In 2019, the top line grew by more than 55%, while net earnings increased by almost 19% compared to 2018. The company has opened many new stores and banners in late 2019 and early 2020, which will likely positively impact its revenue growth this year.

If you are thinking of investing in a restaurant space, this could be an attractive choice. Restaurant Brands International, MTY’s large-sized peer, has outperformed in the last 12 months but looks expensive from the valuation perspective. MTY stock is trading 14 times its expected earnings for the next year while Restaurants Brands International is trading almost 20 times its earnings.

MTY Food Group pays stable dividends and offers a yield of 1.4%. That’s way lower than that of broader markets as well as peer Restaurant Brands International. However, MTY raised its dividends by more than 14% compounded annually in the last five years, beating many of its peers. Dividend growth plays an important role in total returns over a long period.

If you had invested $10,000 in MTY Food Group stock 10 years ago, you would have earned almost $65,000 with dividends reinvested.

Rogers Communications

Communications and media company Rogers Communications is another stock that looks attractive at the moment. The upcoming 5G technology will open up a range of opportunities for Rogers in the next few years. Notably, it seems on track to rolling out the 5G network, well ahead of many of its peers. Its customer additions both in the wireless and cable segments stayed strong in the last few quarters. Thus, even if the 5G rollout hits hurdle, it seems unlikely that the company will take a deep hit on its bottom line.

In 2019, Rogers Communication reported earnings of $2.13 billion on total revenues of $15 billion. Both the metrics marginally fell compared to 2018. However, analysts expect things to turn relatively better for Rogers Communications this year.

Telecom giant Telus stock has notably outperformed Rogers in the last 12 months. From the valuation perspective, Telus looks expensive as well compared to Rogers.

Rogers Communication offers a dividend yield of 3.3%, close to the broader markets. With its fair yield and stable earnings growth, Rogers could be a solid pick for 2020 from the total return standpoint.

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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.

The Motley Fool owns shares of and recommends MTY Food Group. The Motley Fool recommends RESTAURANT BRANDS INTERNATIONAL INC. Fool contributor Vineet Kulkarni does not have any positions in the stocks mentioned.

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