Where to Invest in 2022: Stocks or Bonds?

Because bonds underperform during rising inflation, stocks are better investment options in 2022, although investors must make the right choices.

| More on:
Question marks in a pile

Image source: Getty Images

The Bank of Canada can no longer maintain the low-interest-rate environment because of rising inflation. Investors face a dilemma because the call of the time is capital protection. Fixed-income investors are a worried lot. While bonds are low-risk and perfect hedges against market volatility, they perform poorly during inflationary periods.

Conversely, equities are high-risk investments, but could mitigate inflation risks or cope with them. However, stock investors also worry about a declining TSX due to the new COVID variant. The index lost 2% already in the last five trading days.

If the near-term outlook for the bond market is bleak, you can either stay away from the market or choose stocks that can endure the downturn. The energy sector has viable options like TC Energy (TSX:TRP)(NYSE:TRP). In the industrial sector, TFI International (TSX:TFII)(NYSE:TFII) stands out due to the nature of its business.

Dividend Aristocrat

TC Energy is a Dividend Aristocrat owing to 21 consecutive years of dividend increases. The $57.41 billion energy infrastructure company has raised its dividends for 21 consecutive years. At $58.65 per share, investors enjoy at 18.2% year-to-date in addition to the 5.93% dividend yield. The hefty payout should attract yield-thirsty investors and Tax-Free Savings Account (TFSA) users.

TC Energy reported a strong year-to-date performance and expects full-year 2021 earnings to be modestly higher than full-year 2020. In the nine months ended September 30, 2021, TC Energy’s net income rose 8.8% versus the same period in 2020.

President and CEO, François Poirier, said, “During the first nine months of 2021, our diversified portfolio of essential energy infrastructure assets continued to perform very well and reliably meet North America’s growing demand for energy.” He cites the strong demand for its services and notes the higher-than-normal utilization levels of its systems.

Poirier adds, “We are advancing our $22 billion secured capital program and working on a substantive number of other similarly high-quality opportunities.” Since 100% of its capital projects are either under long-term contracts or regulated, TC Energy has a competitive advantage. Thus, earnings and cash flows are visible.


TFI International operates in the transportation and logistics industry. The $12.82 billion company derives revenues from four business segments (package and courier, less-than-truckload, truckload, and logistics). Business is thriving, as evidenced by the solid earnings results after three quarters in 2021.

In the nine months ended September 30, 2021, revenue and operating income grew 88% and 102% respectively compared to the prior-year period. TFI’s Chairman, President, and CEO, Alain Bedard, said that all business segments delivered robust cash flows and strong performances despite the macro disruptions. Bedard adds the compelling benefits from UPS Freight, a key acquisition, are still ahead.

Management expects to maximize efficiencies, generate strong cash flows, and allocate capital strategically in the coming quarters. Notwithstanding the rapidly-changing times, TFI is in a position of historic strength as the year winds down. The industrial stock is a high-flyer. At $130.96 per share, the year-to-date gain is 101.4%. It also pays a modest 0.87% dividend.

Solid investment choices

If bonds are poor choices in inflationary times, choose stocks that could hold up against the risks. TC Energy and TFI International are solid investments choices for 2022.

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 has no position in any of the stocks mentioned.

More on Dividend Stocks

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

5 Canadian Stocks to Buy and Hold Forever in Your TFSA

Investing in stocks is not always about timing but about holding. Instead of looking at the price, look at the…

Read more »

Arrowings ascending on a chalkboard
Dividend Stocks

The 5.5% Dividend Stock Set to Dominate the TSX

TD Bank (TSX:TD) stock looks severely undervalued while the yield is around 5.5%.

Read more »

protect, safe, trust
Dividend Stocks

Passive Income: How to Earn Safe Dividends With Just $10,000

These three dividend stocks with resilient business models and a growing earnings base can provide durable passive income.

Read more »

Printing canadian dollar bills on a print machine
Dividend Stocks

How to Use Your TFSA to Earn $34,150 Per Year in Tax-Free Income

Canadian investors can hold undervalued TSX dividend stocks in a TFSA and benefit from outsized gains 2024 and beyond.

Read more »

Target. Stand out from the crowd
Dividend Stocks

3 Monthly-Paying Dividend Stocks That Are Screaming Buys Right Now

These three monthly-paying dividend stocks are excellent additions to your portfolios.

Read more »

Growing plant shoots on coins
Dividend Stocks

TFSA Set and Forget: 1 Dividend-Growth Superstar for the Long Run

Manulife Financial (TSX:MFC) stock is in the zone, with dividend hikes and big buybacks likely in the cards.

Read more »

little girl in pilot costume playing and dreaming of flying over the sky
Dividend Stocks

For a Shot at $6,228/Year in Passive Income, Buy 755 Shares of This TSX Stock

Looking for passive income? You'll need to look beyond only dividends. Which is why EIF stock could be one of…

Read more »

Piggy bank with word TFSA for tax-free savings accounts.
Dividend Stocks

TFSA Investors: 2 Dividend Stocks I’d Buy and Hold Forever

These two stocks could provide long-term investors multi-year returns of more or less 10% per year

Read more »