The revival in consumer demand and expected recovery in corporate earnings could continue to drive the Canadian equity market higher in 2021. I expect the momentum in equities to sustain and have picked five under-$50 TSX stocks that could deliver stellar returns in 2021.
Absolute Software
As the spending on cybersecurity threats could continue to increase, I believe the uptrend in Absolute Software (TSX: ABST)(NASDAQ: ABST) stock could sustain in 2021 and beyond. Absolute Software has consistently performed well and delivered strong total annual recurring revenue growth, which indicates that its future revenues could continue to increase at a healthy pace.
Absolute Software expects 12-14% growth in its revenues in 2021, while its margins are expected to gain from lower direct competitive activities and operating leverage. Absolute Software stock is trading at a discount when compared to peers. Further, a large addressable market, robust product pipeline, cross-selling opportunities provide a strong underpinning for growth.
Dye & Durham
Dye & Durham (TSX: DND) stock is expected to benefit from its accretive acquisitions that are likely to generate incremental revenues and adjusted EBITDA. It is on an acquisition spree and has completed 19 acquisitions since 2013, which has led to strong double-digit growth in its top line, expanded its global footprint, and strengthened its competitive positioning.
Besides acquisitions, its base business continues to perform well on the back of a strong blue-chip customer base. Dye & Durham expects its adjusted EBITDA to grow at a breakneck pace over the next couple of years and projects more than 100% growth in FY21 and FY22. Dye & Durham’s strong organic growth, accretive acquisitions, and elevated demand are likely to push its stock higher.
Suncor Energy
Thanks to the recovery in oil prices and improving demand, Suncor Energy’s (TSX: SU)(NYSE: SU) stock could deliver strong returns over the next couple of years. Crude oil prices are trending higher in 2021, providing a strong base for growth. Moreover, its low-cost base is likely to cushion its earnings and support the recovery in its stock.
Suncor stock is down about 37% in one year, which presents a good entry point. Moreover, investors are expected to benefit from its healthy dividend payouts. Suncor stock pays a quarterly dividend of $0.21 a share, reflecting a yield of 3.5%.
Enbridge
Like Suncor, Enbridge (TSX: ENB)(NYSE: ENB) stock is also expected to gain from the revival in demand and recovery in its mainline volumes. Moreover, continued momentum in its gas and renewable power businesses could continue to support its growth in 2021.
Enbridge’s diversified revenue sources, contractual arrangements, and productivity and cost-savings are likely to drive its distributable cash flows and support its future dividend payments. Enbridge has raised its dividend in the last 26 years and offers a yield of 7.6%.
Algonquin Power & Utilities
Algonquin Power & Utilities (TSX: AQN)(NYSE: AQN) has consistently delivered strong returns over the past several years and has boosted its shareholders’ returns through higher dividend payments. Its rate-regulated business and opportunistic acquisitions position it well to deliver strong earnings and cash flows and drive its stock higher.
On average, Algonquin Power & Utilities expects its rate base to increase 11% annually, which is expected to drive its high-quality earnings base and its future payouts. The company projects 11% growth in its dividend in 2021 and is yielding about 3.7%.
