Some Canadians have the appetite to invest in the most-sought after TSX stocks but find the prices a bit pricey. If you have limited funds, it’s possible to buy partial shares of Canada’s top three publicly-listed companies. You can now engage in fractional share stock investing.
Wealthsimple Trade, for example, accepts fractional orders depending on your available funds or spending capacity. You can purchase a fraction instead of a whole share of a stock. Among the eligible TSX stocks are Shopify (TSX:SHOP)(NYSE:SHOP), Royal Bank of Canada (TSX:RY)(NYSE:RY), and Toronto Dominion Bank (TSX:TD)(NYSE:TD). FAANG stocks in the U.S. are also eligible.
Shopify trades at $1,819,63 per share, which is prohibitive for regular investors. But with this new offering, you can purchase half a share (0.5/100) or even one-fifth (0.2/100). In this process, you specify or dictate the amount you want to invest in Canada’s tech superstar.
In 2020, the e-commerce platform overtook RBC as the most valuable company on the TSX. As of July 16, 2021, Shopify’s market cap stands at $226.33 billion. Thus far in 2021, investors are up 26.6%. The mega-cap stock’s total return over the last 6.16 years is 5,722.82% (93.46% compound annual growth rate).
Globally trusted brand
The second-largest publicly listed company is a dividend payer, unlike Shopify. RBC trades at $127.54 per share (+24.33%) and pays a decent 3.34% dividend. Prospective investors can earn two ways, from dividends and capital gain. If you purchase fractional shares of dividend stocks, you’ll also receive payouts depending on the number of shares you own.
RBC is ideal for long-term investors, given the bank’s extensive dividend track record. The total return over the last 48.45 years is 46,969.66% (13.54% CAGR). More importantly, you invest in this top-tier bank for dividend safety.
Canada’s largest lender is a globally trusted brand with a diversified business model. The $181.75 billion bank has also collaborated with DoorDash, a last-mile logistics platform. This new team-up with a tech company shows RBC’s desire to capitalize on the e-commerce boom.
Value for money
Price-wise and value for money, investors, can’t ignore the Toronto Dominion Bank. The $152.81 billion bank is the only company that reported top and bottom lines growth in the 2008-2009 financial crisis. As of July 16, 2021, the share price is $84.02, while the dividend yield is 3.73%.
For the first half of fiscal 2021 (six months ended April 30, 2021), TD’s adjusted net income rose 53.18% to $7.15 billion versus the same period in fiscal 2020. Notably, its provision for credit loss (PCL) went down from $4.1 billion to $64 billion. As a result, Canada’s second-largest bank has $14.6 billion in excess capital.
We can’t second guess where TD will deploy the funds, although its CEO, Bharat Masrani, gave hints recently. He said that the bank would consider returning capital to shareholders. It means a dividend increase is possible.
No stock is high-priced
Apart from the TSX’s outperformance in 2021, fractional share stock investing could attract more Canadians to invest in stocks. No stock is high-priced anymore. You can form an investment portfolio composed of the three largest publicly listed companies in the country with limited capital. Finally, you can sell fractional shares as you would any other stock.
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 Christopher Liew has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Shopify. The Motley Fool recommends the following options: long January 2023 $1,140 calls on Shopify and short January 2023 $1,160 calls on Shopify.