TSX stocks at large have continued to surge higher, despite the bleaker economic picture. Investors should consider stocks that are currently well placed to weather the crisis and that are attractively valued. Let’s take a look at two such TSX stocks.
A safe play in uncertain markets
Utility stocks are relatively safe in uncertain markets. They generate stable cash flows and thus pay stable dividends. There are many appealing utility stocks in Canada, and Emera (TSX:EMA) is one of them.
Emera is a diversified utility company that operates regulated electricity and natural gas portfolio, along with energy midstream and marketing segments. It generates more than two-thirds of its earnings from the United States. Though utilities generally grow very slowly against broader markets, Emera is a relatively fast-growing company.
Its rate base is expected to increase by more than 8% through 2022, which will bode well for its earnings growth. A rate base is a value of the utility’s assets with which it is allowed to receive a definite rate of return set by regulators.
For the last few years, Emera has been switching from coal to relatively clean-burning natural gas for power generation. However, renewables contribute very little to its total generation.
Emera stock is currently trading at a dividend yield of 4.6%, notably higher than TSX stocks at large. It has managed to grow shareholders’ payouts by 10% compounded annually in the last five years.
Emera has returned almost 70% in the last five years, largely in line with the peer TSX utility stocks, but notably beating the broader markets. Emera’s superior dividend profile and discounted valuation make it an attractive bet in the current market scenario.
A food retailer TSX stock with strong growth prospects
The $8.7 billion food retailer Empire Company (TSX:EMP.A) is another stock investors can consider right now. This TSX stock has surged almost 35% in the last three months and still looks attractively valued.
Empire is into a food retailing business that operates through its wholly owned subsidiary Sobeys. It operates more than 1,900 stores located in 10 provinces. The company also has investments and equity interests in real estate company Crombie REIT.
Empire acquired Ontario-based retail grocer Farm Boy in 2018. The acquisition will likely continue to play out well for its earnings growth for the foreseeable future.
Empire has been slow with its top-line growth, but its net income has grown by a massive 48% on average in the last three years. The same translated into its market performance as well. The stock returned almost 130% in the last three years.
I think Empire’s above-average financial growth will continue for the near future with Farm Boy’s expansion and rollout of retail stores. Voila — its recently launched online grocery home delivery service will likely support its top-line growth as well.
Empire looks well placed to weather the crisis, mainly due to its strong balance sheet, which is also strong to fund its future growth plans. Its discounted valuation and long dividend history add to a lucrative investment proposition for long-term investors.