3 Top TSX Stocks to Buy for May 2021

Growth stocks such as Shopify and Enbridge are well poised to outpace the broader markets in 2021.

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The equity markets continue to touch record highs, despite a sluggish global economy and rising COVID-19 cases. While technology stocks have crushed the broader markets in the last year, there are a few companies that are still available at attractive valuations. Here, we’ll look at three such stocks that should move higher in May 2021.

Brookfield Renewable Partners

While Brookfield Renewable Partners (TSX:BEP.UN)(NYSE:BEP) has been a solid wealth creator for long-term investors, it is currently trading 20% below its record high. This gives investors an opportunity to buy a stock with a forward yield of over 3%.

Earlier this month, Brookfield sold around 400 MW of its wind-powered assets to NextEra Energy. Brookfield’s total wind-power generating capacity is close to 4,700 MW, so this asset sale accounts for around 8% of its portfolio in this vertical. Brookfield also sold its onshore wind operations in the U.K. to Demark-based company Orsted.

These asset sales will help Brookfield derive over $1.3 billion, which will be reinvested in other expansion projects and acquisitions. Brookfield is optimistic about growing its cash flow per share at an annual rate of 10% through 2025, despite the above-mentioned sales, allowing it to support dividend increases going forward.

Enbridge

When it comes to investing in quality TSX stocks, it’s difficult to ignore Enbridge (TSX:ENB)(NYSE:ENB). One of the largest energy companies in North America, Enbridge has a diversified base of cash-generating assets that has allowed it to increase dividends at an annual rate of 10% in the last 26 years.

Despite falling oil prices in 2020, Enbridge’s robust contract-based business model meant the company increased its distributable cash flow per share last year. Enbridge’s management has a payout target ratio of between 60% and 70%, which will help the company invest in capital expansion projects and increase dividend payouts in the future as well.

Enbridge stock currently has a tasty forward yield of 7.15%. It’s also trading 11% below average analyst price target estimates, making ENB stock a top bet for income and value investors. Enbridge continues to invest heavily in the renewable energy space, which will help it diversify its asset base and drive top-line growth in the upcoming decade.

Shopify

Another top TSX stock that has lost momentum in recent times is e-commerce giant Shopify (TSX:SHOP)(NYSE:SHOP). The largest Canadian company in terms of market cap, Shopify has been a top-performing stock ever since it went public back in 2015. Shopify stock has returned over 4,000% since its IPO and is now trading 18% below its record high.

While investors are concerned over its steep valuation, they should not discount Shopify’s enviable growth rates. In 2020, the company managed to increase sales by 86% year over year. Analysts tracking the stock expect Shopify sales to increase by 40.5% to $4.12 billion in 2021 and by 31.6% to $5.4 billion in 2022. Further, Shopify is forecast to grow earnings at an annual rate of over 50% between 2022 and 2026.

The COVID-19 pandemic has acted as a massive tailwind for Shopify and other e-commerce peers. This has accelerated the online shopping trend, making Shopify one of the top stocks to watch out for in the upcoming decade.

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.

Tom Gardner owns shares of Shopify. The Motley Fool owns shares of and recommends Enbridge, Shopify, and Shopify. Fool contributor Aditya Raghunath has no position in any of the stocks mentioned.

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