My 3 Favourite TSX Stocks Today

These three are my favourite Canadian stocks today, because they have been superb performers through 2020, and that’s poised to continue!

| More on:
edit Balloon shaped as a heart

Image source: Getty Images.

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

My three favourite TSX stocks did well through the pandemic. It speaks volumes for any business to be resilient during the pandemic. Economic lockdowns and the impacted global economy led to many businesses seeing huge cuts in their revenues!

Brookfield Infrastructure Partners (TSX:BIP.UN)(NYSE:BIP), Shopify (TSX:SHOP)(NYSE:SHOP), and Converge Technology Solutions (TSX:CTS) have been incredible businesses through 2020 and beyond.

My favourite TSX dividend stock

Brookfield Infrastructure is easily my favourite dividend stock on the TSX with a predictable business providing stable growth and anticipated dividend growth.

The global infrastructure company owns, operates, and invests in utilities, transport, energy, and data infrastructure assets. To get a better sense of the diversity of its business, it has electricity and gas connections, regulated natural gas pipelines, electricity transmission lines, ports, railways, and toll roads, natural gas storage, multi-purpose telecom towers, and data centres.

In 2020, its key performance metric, its funds from operations (FFO) per unit, increased by 2.3% to US$3.13, resulting in a sustainable FFO payout ratio of 62%.

Today, BIP provides a decent yield of about 3.8%. This year’s dividend hike of 5.2% marks the 13th consecutive year of its dividend-growth streak. There’s no guesswork. It intends to continue increasing its cash distribution by 5-9% a year.

Analysts deem the TSX stock to be fairly valued with 12-month upside potential of about 11%. This implies total returns of close to 15% are possible in this defensive stock.

A TSX growth stock favourite

Shopify stock is one of my favourite TSX growth stocks, and it is in many other investors’ growth portfolios. In the last five years, SHOP stock has grown investors’ money at a rate of 51 times. It hasn’t been an easy hold, but buying on dips, corrections, and consolidations have proved to be the right moves in a long-term investment in the winning stock.

As a leader in the expanding e-commerce industry, Shopify experienced exceptional growth through the pandemic. In 2020, the global commerce company witnessed revenue growth of 86% to nearly US$3 billion, while the gross merchandise volume jumped 96% to almost US$120 billion.

This year, Shopify has planned for incremental investments, including upgrading its fulfillment network, optimizing the Shop App, attracting more international entrepreneurs, etc. Combined, the investments should drive more growth in the company.

SHOP stock recently popped 20%, but analysts still think it’s fairly valued. It’s certainly at least a hold for long-term growth.

Why this tech stock is my favourite small-cap stock

When you pick the right small-cap stocks, you can multiply your money very fast. Converge is in the mid-market sweet spot. Smaller companies haven’t adopted hybrid/cloud as quickly as larger companies.

This has created a unique opportunity for Converge as an IT service provider that offers hybrid IT solutions, including digital infrastructure, cloud, cybersecurity, advanced analytics, managed services, and placing IT professionals for the right jobs.

The tech stock has executed its North American expansion plan well. It continues to aim to acquire three to five North American companies every year. Acquisitions and integrations could get more complicated, as it shifts to make bigger acquisitions in North America. It strategized to replicate its M&A success in North America in Europe.

So far, Converge’s M&A success has been directly reflected in its stock. To illustrate its growth potential, the tech stock has grown at 3.5 times SHOP stock’s price appreciation year to date.

CTS Chart

Year-to-date data by YCharts.

The tech stock has amazing growth prospects that are highly linked to its M&A strategy. If done right, it will be a multi-bagger from here, as the small-cap stock remains fairly valued in analysts’ eyes.

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.

The Motley Fool owns shares of and recommends Shopify. The Motley Fool recommends BROOKFIELD INFRA PARTNERS LP UNITS and Brookfield Infrastructure Partners and recommends the following options: long January 2023 $1,140 calls on Shopify and short January 2023 $1,160 calls on Shopify. Fool contributor Kay Ng owns shares of Brookfield Infrastructure Partners, Converge, and Shopify.

More on Dividend Stocks

edit Back view of hugging couple standing with real estate agent in front of house for sale
Dividend Stocks

Why Real Estate Stocks Are a No-Brainer Addition to Your Portfolio

Real estate stocks, especially REITs, offer some distinct advantages over other types of stocks, making them must-have additions to most…

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

3 Top TSX Dividend Stocks to Buy for Monthly Passive Income

Top TSX stocks with monthly dividends now trade at cheap prices for investors seeking passive income.

Read more »

Canadian Dollars
Dividend Stocks

Create Free Passive Income and Turn it Into Thousands With 1 TSX Stock

If you can't afford to invest, you can certainly create passive income another way and use that to invest in…

Read more »

Payday ringed on a calendar
Dividend Stocks

Canadian Dividend Investors: 2 ETFs That Pay Monthly Income With High Yields

Dividend ETFs often pay out monthly distributions compared to dividend stocks.

Read more »

think thought consider
Dividend Stocks

2 Stocks I Own and Will Buy More of if They Fall

Stocks tend to go up in the long run. Therefore, buying a basket of diversified stocks on dips should lead…

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

2 Oversold TSX Dividend Stocks to Buy for Passive Income

Blue-chip dividend stocks such as Royal Bank of Canada and Manulife Financial pay investors a tasty forward yield.

Read more »

TFSA and coins
Dividend Stocks

TFSA Passive Income: 3 Solid Stocks to Earn $355 Every Month

Looking to earn steady passive income? Here are three solid TSX stocks that can help you earn a worry-free passive…

Read more »

Dividend Stocks

RRSP Investors: 2 Stocks to Buy in August for Dividends and Capital Gains

RRSP investors can still find top TSX dividend stocks trading at cheap prices today for a buy-and-hold portfolio.

Read more »