As markets struggled through most of March, blue-chip stocks have traded lower. Now, there are some cheap TSX stocks available for long-term investors to pounce on.
With a long enough investment horizon, any potential turbulence ahead in the near term will be negligible. As such, investors can now seek out stocks at attractive valuations with solid yields to buy and hold for the long term.
However, it’s important to be aware of the risks surrounding any individual stock. In some cases, the stock may have just been dragged down with the market. But, in other cases, the stock is facing some true challenges ahead.
Today, we’ll look at two cheap TSX stocks investors can keep an eye on and what might be in store for these stocks.
This stock has climbed a bit in the past week or so but is still far below even its February levels. As of writing, it’s trading at $85.63.
At that price, the dividend yield is 5.04%. That should be mouth-watering for investors, as it’s not very common that RBC offers a yield exceeding 5%. In fact, its average yield over the past five years is below 4%.
So, at a relatively low P/E ratio and with an outsized yield, this cheap TSX stock seems to offer great value to investors.
Now, it should be noted that the bank will face some challenges in the near term. Lower interest rates mean lower margins generally, and mortgage deferrals could make for a cash flow pinch.
However, RBC is quite well capitalized and has a healthy balance sheet. It also has liquidity support measures to fall back on courtesy of the government. As such, I wouldn’t bank on RBC slashing its dividend any time soon.
Sure, we might see slower growth for a short period, but over a long horizon, there isn’t much to worry about here.
This cheap TSX stock is trading at $24.82 as of writing. That figure is a far cry from its late-February levels of above $40.
With that price, the stock is currently yielding a mammoth 7.49%. So, for investors looking for a blue-chip stock with a big dividend, it seems Suncor is attractive.
However, there are some serious concerns in the oil industry right now. In fact, a lot of Canadian producers are operating at just breakeven prices right now.
This has certainly, in conjunction with the global pandemic, led to the steep drop in energy stocks. If you don’t want to make a bet on the Canadian oil market, then staying away from Suncor is probably a prudent move.
Choosing cheap TSX stocks
With many stocks trading at solid long-term valuations right now, investors have options. As such, it’s vital to carefully weigh the risk/reward ratio of individual stocks in these times.
RBC is a solid choice for those looking to lock in a big, reliable yield. While Suncor might have an even more attractive yield, it carries some direct risk with the oil situation. For some, it might not be worth taking on that extra risk.
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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 Jared Seguin has no position in any of the stocks mentioned.