Popular stocks are not necessarily the best buys. Canadian Western Bank (TSX: CWB), Mullen Group (TSX: MTL), and SunOpta (TSX: SOY) fly under the radar but could deliver far superior returns in 2022.
Differentiated business model
The Big Six banks dominant the financial sector because of their sheer size and outstanding dividend track records. All of them recently announced dividend hikes effective next year. However, Canadian Western Bank offers would-be investors growing dividends. The $3.32 billion diversified financial services organization has raised its dividends for 29 consecutive years.
In fiscal 2021 (year ended October 31, 2021), CWB reported 13% and 30% increases in total revenue and diluted earnings per common share. Chris Fowler, CWB’s president and CEO, said, “In 2021, we again demonstrated the quality of our differentiated business model.” It was also the first time that the bank’s annual revenue surpassed $1 billion.
Fowler expects CWB’s momentum to continue in fiscal 2022, and it should deliver double-digit growth in loans and branch-raised deposits. Management believes it’s an exciting for the bank. The immediate plan is to invest in its capabilities and improve the full-service client experience via enhancements to CWB’s in-person and digital channels.
CWB trades at $36.31 per share and pays a decent 3.3% dividend.
Economy’s need
Mullen Group is a low-profile dividend stock. The industrial stock trades at only $11.73 per share but pays a respectable 4.09% dividend. This $1.12 billion company is one of Canada’s largest logistics providers. It boasts a network of independently operated businesses providing various services such as warehousing, logistics, and hauling.
Business is thriving in the pandemic environment, as evidenced by the financial results after three quarters in 2021. Mullen reported a 19% increase in revenue versus the same period in 2020, while net income declined slightly by 3.2%. Its chairman and CEO Murray Mullen said it was a record revenue for any quarter in Mullen’s history.
Mullen added that the company invests significant capital to acquire firms providing logistics solutions, because they are what today’s economy needs. The company’s competitive advantage is the combination of a diversified business model and a highly adaptable, variable cost structure. It enables Mullen to generate cash in excess of its operating needs.
Strong consumer demand
SunOpta trades at a deep discount ($8.70 per share), but you should look more at the business potentials than the 41.63% loss. The $879.11 million healthy food and beverage company focus on plant-based foods & beverages and fruit-based foods & beverages.
Joe Ennen, CEO of SunOpta, said, “Despite recent global supply chain issues, our plant-based business produced another solid quarter of growth.” It was a record setting Q3 2021 as plant-based revenue went up 16% versus the same quarter in 2020. Ennen said the growth reflects SunOpta’s sustained competitive advantages and incredibly strong consumer demand.
Management says the encouraging sign is the demand from SunOpta’s new and existing clients remains at unprecedented levels. Thus, SunOpta will continue to execute well against its strategic priorities. This consumer-defensive asset should be tops on the list of growth investors in 2022.
Strength of the businesses
Canadian Western Bank, Mullen Group, and SunOpta flies under the radar, because popular stocks have better name recalls. However, the gains could be so much more because of the strength of the respective businesses.
