Considering Top Meme Stocks? 2 Cheap Canadian Stocks to Buy Instead

Top meme stocks that are favoured among the Reddit crowd are exciting to watch and trade. Investors searching for buy-and-hold winners, however, might want to consider these top Canadian stocks instead.

| More on:
work from home

Image source: Getty Images

The meme stock mania continues to capture the headlines. Traders betting on top Reddit stocks might make some quick money, but the risks of getting hammered on the pullback are also significant. Investors with a buy-and-hold strategy might want to consider some other cheap alternatives today.

Canadian National Railway

Canadian National Railway (TSX:CNR)(NYSE:CNI) is trying to buy Kansas City Southern (NYSE:KSU) for US$30 billion-plus debt. The market punished the stock in recent weeks for the brazen move by CN’s management team to outbid its Canadian competitor, CP Rail, for Kansas City Souther after CP already had a tentative agreement in place to buy Kansas City Southern for US$25 billion-plus debt.

CN shares traded as high as $149 this year. The stock fell as low as $126 on the takeover news and currently trades close to $134. Ongoing near-term volatility should be expected until investors find out if regulators will approve the deal. In the event CN is forced to abandon the takeover, it will lose the US$700 million it agreed to give Kansas City Southern to cover the break fee for dumping CP Rail.

Buying CN on a dip has historically proven to be a good strategy. The current pullback shouldn’t be different. Whether CN buys Kansas City Southern or continues to operate under the current scenario the company should deliver strong long-term profits and free cash flow.

CN already has a wide competitive moat. Adding Kansas City Southern would strengthen the position. Economic growth in Canada and the U.S. is ramping up and could roll along at a blistering pace for the next few years. CN transports most of the raw materials and finished goods used in the economy and stands to see demand for its services increase in the coming months and years.

Enbridge

Enbridge (TSX:ENB)(NYSE:ENB) trades near $50 per share and provides investors with a 6.7% dividend yield. Distribution growth should trend at 5-7% per year over the medium term, in line with expected gains in distributable cash flow (DCF). Even if the stock doesn’t move higher, the return you get on the dividend makes the shares attractive today.

Enbridge’s oil pipelines took a hit last year. The plunge in fuel demand meant refineries didn’t need as much crude oil feedstock. In the coming months, businesses will bring employees back to the office and domestic travel should increase. Once the international border closures are removed, airlines will ramp up fuel purchases. The rise in commuter traffic and air travel should drive strong fuel demand. As this happens, Enbridge will benefit.

On the growth side, the company is moving away from oil pipelines and investing more money in building its natural gas transmission, storage, and distribution utility businesses, along with expanding the renewable energy group.

The stock is off the 2020 lows but still looks cheap. It wouldn’t be a surprise to see Enbridge slowly climb back to its 2015 high of around $65 over the next two years.

The bottom line

Top meme stocks are entertaining to follow, and the wild moves in the top Reddit stocks have made some traders rich.

If you have some meme stock profits to invest in and want a safer bet, or simply don’t have the stomach for the Reddit stock volatility, CN and Enbridge look like attractive alternative picks today for a buy-and-hold 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 Andrew Walker owns shares of CN and Enbridge.

More on Dividend Stocks

View of high rise corporate buildings in the financial district of Toronto, Canada
Dividend Stocks

Top 2 REITs to Buy Before Yields Fall Along With Interest Rates

Canadian Apartment Properties REIT (TSX:CAR.UN) is just one REIT that could gain when rates really start to tumble.

Read more »

Printing canadian dollar bills on a print machine
Dividend Stocks

Where to Invest $10,000 in June

Canadian small caps are widely outperforming the TSX, and REITs, including Dream Industrial REIT (TSX:DIR.UN) could recover as interest rates…

Read more »

edit Real Estate Investment Trust REIT on double exsposure business background.
Dividend Stocks

Finally, This REIT ETF Could Be the Best Buy of 2024

This ETF is finally looking up, with enormous returns already in 2024. And a high dividend yield that should only…

Read more »

dividends grow over time
Dividend Stocks

3 Canadian Stocks Poised to Double by 2025

Three TSX stocks could benefit from an improved market environment, and break out and double by 2025.

Read more »

A close up color image of a small green plant sprouting out of a pile of Canadian dollar coins "loonies."
Dividend Stocks

Why Park Lawn Stock Nearly Doubled Last Week

Park Lawn (TSX:PLC) stock saw shares surge by 67% after the announcement that it would be going private as early…

Read more »

A Canada Pension Plan Statement of Contributions with a 100 dollar banknote and dollar coins.
Dividend Stocks

Claim CPP at 60? Here’s Why it Could Pay Off Big

Claiming the CPP at 60 has financial consequences but could be advantageous and more beneficial to some prospective retirees.

Read more »

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Dividend Stocks

Rate Cut Tailwinds: A Dividend Dynamo Ready to Fly

SmartCentres REIT (TSX:SRU.UN) is a great high-yield play to own if you think rates will fall off from here.

Read more »

Increasing yield
Dividend Stocks

2 High-Yield Dividend Stocks That Are 10/10 Buys in June

These two dividend stocks are making a roaring comeback, and it's one that will only grow stronger now that interest…

Read more »