In today’s stock market, growth stocks continue to outperform. Indeed, investors can see why this is the case. Interest rates remain near historic lows, and all indications are that the economy is set to go full steam ahead. Indeed, this is the perfect storm for many growth stocks.
However, valuations have become stretched in many segments of the market. Accordingly, many investors are increasingly looking for better value and well-rounded returns.
In this article, I’m going to highlight two top slower-growth picks with excellent potential for stable double-digit returns over time. These stocks are higher-yielding and more defensive than traditional hyper-growth plays.
Let’s dive in.
Perhaps one of the most defensive plays in the energy space is Enbridge (TSX:ENB)(NYSE:ENB). Indeed, this pipeline player provides long-term investors with a lot to like. The company is exposed to the red-hot energy sector. And its cash flows are extremely stable, locked in via long-term contracts over time.
These stable cash flows provide the basis upon which Enbridge is able to pay out a sky-high yield of 6.8%. For any company, that’s a high yield. And many investors may rightly question how viable this yield is over time.
That said, Enbridge has recently announced it’s re-routing more of its cash flows toward balance sheet improvement initiatives. The company continues to focus on cutting costs and reducing its debt load at the expense of higher dividend increases. Enbridge is still expected to hike its dividend by around 3% a year for the medium term. However, these capital-reallocation initiatives ought to be bullish for shareholders over the long run.
Enbridge’s current pipeline expansion projects have hit some political headwinds of late. However, given the importance of our existing energy infrastructure, Line 3 should be completed shortly. Line 5 is likely to be face higher regulatory hurdles; however, Enbridge has shown it’s a company with a management team willing to do what it takes to make its growth projects happen.
Accordingly, Enbridge is a stock I think every long-term investor should consider for total returns.
Indeed, Telus’s business model is among the most attractive of its peers. Besides the company’s core wireless telecom business (which is very strong), Telus has diversified its portfolio into other high-growth areas. The recent spinoff of its IT outsourcing arm Telus International has proven to be a solid move. Telus’s management team is in the business of creating value for its shareholders. And I see more value being created via additional spinoffs in the future. The company’s health division is one that’s set for an IPO shortly.
Additionally, investors shouldn’t forget the secular catalysts underpinning this stock. Telus remains highly exposed to 5G tailwinds and growth in data usage in Canada. These tailwinds have long time horizons and should take Telus shareholders on a nice ride over the long term.
The cherry on top for Telus is its dividend. The company pays its investors a healthy yield of 4.5%. What more could investors ask for?
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 Chris MacDonald has no position in any stocks mentioned in this article. The Motley Fool owns shares of and recommends Enbridge. The Motley Fool recommends TELUS CORPORATION.