Despite the uncertainty related to the resurgent virus, the Canadian equity market continues to hold firm with solid momentum in several TSX stocks. The easing of restrictions, increased economic activities, recovery in consumer demand, and corporate earnings growth suggest that the momentum in a few shares will likely sustain in the coming quarters.
I’ll focus on three such Canadian stocks that witnessed healthy growth in the recent past. Moreover, I expect the uptrend in those stocks to sustain. I have zeroed in on shares of Capital Power (TSX:CPX), Pizza Pizza Royalty (TSX:PZA), and StorageVault Canada (TSXV:SVI). Over the past year, these under-$50 stocks have gained about 52%, 41%, and 90%, respectively. Let’s look into their growth catalysts.
Capital Power
This utility giant has witnessed solid buying in its stock and has handily outpaced the benchmark index with its returns on the back of its high-quality earnings. Thanks to the continued momentum in its business and its solid asset base, Capital Power remains upbeat about its financial performance and raised its 2021 outlook for adjusted EBITDA and funds from operations.
Capital Power’s low-risk business model and contractual framework augur well future growth and will likely support its earnings and cash flows. The company also remains on track to fund its growth initiatives, which is encouraging and could drive its stock price higher.
Thanks to its predictable cash flows, Capital Power has raised its dividend for eight consecutive years, with the most recent dividend increase of 6.8%. Meanwhile, its payout ratio of 45-55% is sustainable in the long run. Notably, Capital Power stock trades at a lower valuation than its peers, indicating further upside in its stock from current levels.
Pizza Pizza Royalty
Like Capital Power, Pizza Pizza Royalty stock has generated good returns over the past year and rewarded its shareholders with higher dividends. It’s worth noting that this quick-service restaurant offers monthly dividend payouts to its shareholders. Moreover, it recently hiked its dividend and is yielding about 6.3%.
With the ongoing vaccination and the expected normalization in demand trends, I expect Pizza Pizza Royalty’s financials could improve sequentially. Meanwhile, its traffic and walk-in sales could soon revive. I remain optimistic about the stock, as the company’s focus on network expansion, delivery promotions, and delivery sales bode well for future growth.
Furthermore, improvement in its financials will likely support higher dividend payouts in the coming years.
StorageVault Canada
Investors can also consider adding StorageVault Canada stock to their portfolios. As discussed above, StorageVault stock has appreciated quite a lot, and I expect the uptrend to sustain on the back of its solid fundamentals and accretive acquisitions.
Notably, StorageVault’s underlying business remains strong, and its higher occupancy rate and growing rental space bode well for its future growth. Meanwhile, its solid capital-allocation strategy will likely accelerate its growth and boost its cash flows. Further, its dominant positioning in the domestic market and significant barriers to entry in the segment position it well to deliver consistently higher returns in the coming quarters.
