It is not necessary to take higher risks to create wealth. Disciplined, long-term investing in a diversified portfolio is enough to make a fortune. Here are three TSX stocks that offer an additional safety layer compared to their peers.
Investors can consider adding them to their Tax-Free Savings Accounts (TFSAs). You can save tax dollars on the capital appreciation and dividends by investing in these TSX stocks via a TFSA. The contribution limit for 2021 is $6,000.
Hydro One
Utilities are inherently safe investments, because of their relatively safe business operations. Interestingly, Hydro One (TSX: H) provides an additional layer of safety for investors.
That’s because it is a utility that is not involved in power generation but only takes care of transmission and distribution. This saves on big upfront investment and minimizes exposure to volatile commodity prices.
Like many other utilities, Hydro One generates stable earnings facilitating stable dividends. It yields 3.4% at the moment, which is in line with its peers. It distributes 70-80% of its earnings to shareholders in the form of dividends.
Hydro One stock has returned more than 10% in the last 12 months, outperforming TSX stocks at large. Investors can expect slow but stable capital appreciation and consistent dividend growth from Hydro One, driven by its safe earnings profile and low-risk operations.
WSP Global
WSP Global (TSX: WSP) is another safe bet for investors. It is a $13 billion infrastructure consulting and design company. It is not involved in project construction and avoids a significant capital outlay. Like Hydro One, it offers a low-risk proposition for investors, as the project risk is notably minimized.
WSP Global announced the purchase of a peer consulting firm Golder Associates for $1.5 billion late last year. Golder operates in 30 countries and specializes in geosciences and engineering. WSP will likely save on cost synergies and could see accelerated earnings growth after the acquisition.
WSP stock returned more than 20% in the last 12 months. It saw a remarkable jump early last month on the acquisition news. The company will report its fourth-quarter earnings next week. It will be interesting to see how the combined entity sees the path ahead in the long term.
BCE
If you are planning to hold a stock for decades, consider Canadian telecom giant BCE (TSX: BCE)(NYSE: BCE). It generates stable earnings and pays growing dividends.
BCE is the biggest telecom and media company by market capitalization and by subscriber base. Telecom is one of the most recession-resilient and safest industries across broader markets.
The telecom titan BCE intends to invest billions of dollars in network upgradation and 5G infrastructure expansion. Investors will likely see faster earnings growth in the next few years with a widespread 5G network.
For investors, its dividend profile is highly comforting. BCE stock yields more than 6%, notably higher than TSX stocks at large. BCE stock has been comparatively weak in the last few months. However, its slow-moving stock and consistent dividends could create solid wealth in the long term.
