2 Great Canadian Stocks to Buy Now and Hold Forever

Read why Barrick Gold (TSX:ABX)(NYSE:GOLD) plus one other great Canadian stock can reward shareholders for years to come.

| More on:
A close up image of Canadian $20 Dollar bills

Image source: Getty Images

When uncertainty stalks the markets, only the strongest stocks will do. That’s why we’ve picked out two of the sturdiest names currently trading on the TSX. The following top stock picks are based on three main criteria. In order to make the cut, these two companies had to be well established, profitable, and undervalued. With over $1 billion in market capitalization apiece, both names are reasonably priced based on cash flows.

The solid gold stock choice

Barrick Gold (TSX:ABX)(NYSE:GOLD) is something of a one-stop stock for access to the yellow metal. Warren Buffett might have flip-flopped, but the buy thesis remains strong. As an explorer, developer, producer, and retailer, Barrick is involved at every step of the gold mining process. It also brings exposure to copper. This little-known fact makes Barrick a de facto low-exposure play for a range of growth industries.

To the classic low-risk play of a precious metals stock, investors can therefore add strategic capital gains potential. From renewables upside to electric vehicles access, copper exposure brings growth potential to a commodities portfolio. Such benefits also come at a fairly competitive price. Selling for $30 a share, though, Barrick has lost 20% since the end of summer. In short, this stock is a steal right now.

The Big Five banking stock

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) clocks in at the shallower end of the Big Five in terms of market cap. CIBC is nevertheless a world-leading, diversified, blue-chip financial, bringing access to a range of services and products. As such, it adds strategic benefits to the financials segment of a TSX stock portfolio. These include exposure to both institutional and public sector banking. And, of course, CIBC also counts commercial and business customers as clients.

Year on year, CIBC has seen only moderate share price growth. However, while value could also be slightly better, this is a very healthy stock with a low debt-to-equity ratio. A 5.2% dividend yield is still one of the richest among Bay Street financials. A payout ratio of 72% further assures shareholders that its distribution is secure. This coverage also offers long-term investors some potential for dividend growth.

A P/B ratio of 1.3 times book is fairly standard for a top Canadian bank. These names are slightly expensive, in large part because they are such high quality. Predictability is a commodity in itself in these uncertain times, though. Indeed, with a 36-month beta of 0.9, CIBC displays volatility somewhat lower than that of the market. This should be of note to investors with a low threshold for risk in their dividend stock portfolios.

In summary, Warren Buffett may have done gold investors a favour by making a U-turn on Barrick. Indeed, a general pullback in gold will only offer greater value opportunities in this must-have commodity. A 1.5% Barrick dividend yield remains rich. And the safe-haven status of gold is, as always, unassailable. Throw in the safety of a Big Five banker, and a Barrick-CIBC stock pairing could add years of passive income plus stability to a low-risk TSX stock portfolio.

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 Victoria Hetherington has no position in any of the stocks mentioned.

More on Dividend Stocks

Two seniors float in a pool.
Dividend Stocks

TFSA: How to Earn $1,890 in Annual Tax-Free Income

Plunk these investments into your TFSA to earn passive income and avoid the taxman.

Read more »

Engineers walk through a facility.
Dividend Stocks

1 TSX Stock I Wouldn’t Touch With a 10-Foot Pole

AtkinsRéalis (TSX:ATRL) is one TSX stock I'd never invest in.

Read more »

edit Woman in skates works on laptop
Dividend Stocks

3 No-Brainer Stocks to Buy Under $30

These three stocks all offer a huge deal for investors looking for dividends, as well as growth that will last.

Read more »

You Should Know This
Dividend Stocks

How to Convert a $300 Monthly Investment Into $338 in Monthly Income

If you want a certain amount in monthly passive income, invest a similar amount today and leave the rest to…

Read more »

Increasing yield
Dividend Stocks

3 Income Stocks With Big Yields to Consider in April 2024

If you haven’t yet made your March investments, here are three income stocks to buy the dip and lock in…

Read more »

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Dividend Stocks

RRSP Investors: Don’t Miss Out on This Contribution Hack!

This hack has so many benefits for you -- not just when you put it in your RRSP but for…

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

Passive Income: 2 Safe Dividend Stocks to Own for the Next 10 Years

Dividend stocks such as Manulife and Fortis can help you generate a stable and recurring passive-income stream.

Read more »

Young woman sat at laptop by a window
Dividend Stocks

3 Dividend Stocks Everyone Should Own for the Long Haul

For investors looking for top-tier dividend stocks to buy and hold for the long term, here are three of my…

Read more »