It’s difficult to develop a standard definition for “beginner stocks.” That’s because even as beginners, most investors have certain tendencies, risk tolerances, and industry/market preferences that guide their decisions.
But at its most basic form, a beginner stock will likely be an industrial leader (with distinct competitive advantage), have time-tested return potential, and have a history of stability through rough market conditions.
There are plenty of stocks that fulfill these criteria, and three of them should be on your radar right now.
A utility giant
Fortis (TSX:FTS)(NYSE:FTS) is a utility giant in Canada with domestic operations in an international presence in the U.S. and multiple Caribbean countries. It caters to 2.1 million electric and 1.3 million natural gas customers, and 99% of its assets are regulated.
So, it’s very stable, even for a utility company, and its income only has a chance of going down if thousands of people suddenly stop paying their utility bills.
While its operational stability is one of the reasons why it gets so much limelight, it’s not the only reason why Fortis is one of the most coveted growth stocks. Another main reason is its stellar dividend history as the second-oldest aristocrat in the country that has grown its payouts for 48 consecutive years. It also offers modest capital-appreciation potential, which complements its usually healthy yield.
A railway leader
The railway sector in Canada is highly consolidated, with only two giants and the larger one (by market cap) is Canadian National Railway (TSX:CNR)(NYSE:CNI). It’s a highly financially stable institution, thanks partly to its railroad connecting three different North American coasts, which allows it to capture a sizeable portion of the low-cost freight market.
Canadian National Railway is a well-established aristocrat and has grown its payouts for 26 consecutive years. However, the yield usually gets overshadowed by its capital-appreciation potential. The 10-year CAGR of 17.4% is far more compelling than the current 1.75% yield.
The stock is just slightly overvalued right now, but considering its long-term growth potential, it’s a perfect beginner stock you can buy at almost any given time.
The banking leader
Royal Bank of Canada (TSX:RY)(NYSE:RY) is one of the largest banks in North America and currently the top valued security on the TSX. As a clear leader of the Canadian banking sector, both by weight (market capitalization) and by its business reach, it’s in a strong enough position to sway the financial market in the country.
This makes it a powerfully stable institution to hold in your portfolio. That’s because, even though it’s not immune to the market dynamics, its stability prevents it from falling too hard and allows it to recover relatively faster compared to smaller and more volatile players. And its stability comes with a decent yield and modest capital-appreciation potential, making it a relatively smart buy.
Foolish takeaway
When you are just starting to invest, these are the many tried and tested Canadian stocks that don’t just offer stability in a variety of market conditions but also decent return potential. These stocks are well suited for both conservative and relatively daring investors.
