Instead of chasing risky growth stocks, I would prefer stocks that offer stability and create a sizable wealth over the long term. Consistently growing dividends would certainly be the cherry on top. After all, the point is to create a decent fortune with safe stocks and avoid those that give you sleepless nights.
Let’s look at three such TSX stocks that are safe and offer a decent total return potential for the long term.
Top TSX stocks: Algonquin Power & Utilities
Among utility stocks, Algonquin Power (TSX: AQN)(NYSE: AQN) is a relatively faster-growing utility and offers a superior dividend yield. That’s why it is better placed to outperform peers over the long run.
Algonquin generates a large chunk of its earnings from regulated operations, which offer earnings stability and predictability. The company has a significant investment in renewable power generation as well.
Algonquin stock yields almost 5% at the moment, higher than peers. The company expects its dividends to increase by 7% per year for the next few years, also higher than the industry average.
The stock has had a relatively faster recovery post-COVID-19 crash. Interestingly, the stock looks attractively valued and might continue to climb higher.
Importantly, Algonquin’s earnings stability makes its dividends stable. Moreover, due to its less-volatile stock, it is likely to play well during market crashes.
Barrick Gold
Investors can consider the second-biggest gold miner, Barrick Gold (TSX: ABX)(NYSE: GOLD), amid the rising yellow metal price.
Almost all gold miner stocks have significantly soared in the last few months. Barrick Gold stands tall with a 70% surge in the last 12 months. Its net income has risen by almost 100% in this period.
Interestingly, gold is expected to continue its upward momentum for the rest of 2020. Thus, it will likely have a positive impact on gold miners’ bottom line, ultimately boosting their market performance.
Barrick Gold offers a dividend yield of 1% at the moment, notably lower than TSX stocks at large. Though it doesn’t present a juicy yield right now, its dividend-growth rate was much higher in the last three years.
Total returns comprise of capital gains as well as dividends. Barrick Gold can deliver handsome total returns over the long term with its superior earnings growth and consistently increasing dividends.
AltaGas
AltaGas (TSX: ALA) operates in three segments: utilities, midstream, and power. Its non-cyclical nature of the business makes for stable earnings, even during economic declines, which makes it a safe play for investors. Its utility segment provides stability, while the midstream business presents growth.
AltaGas stock offers a yield of 6%, much higher than TSX stocks at large. It means if one invests $10,000 in ALA at the beginning of 2020, they will generate $600 in dividends.
AltaGas stock has regained almost half of the value that was lost during the COVID-19 crash. But interestingly, its current valuation suggests limited downside and room for more growth ahead.
Canadians have one of the most tax-efficient investment avenues in the form of a Tax-Free Savings Account (TFSA). The total returns generated within the TFSA will be tax-exempt throughout the holding period as well as at withdrawals.
The three TSX stocks discussed above offer solid total return potential, that is superior stock appreciation potential and tasty dividends. TFSA investors can consider these relatively safe stocks, which can create a robust reserve over the long term.
