Many Canadians increased their cash reserves to combat uncertainties amid the pandemic. However, as things normalize, that cash could earn higher returns when deployed with some high-quality TSX stocks. Here are three top TSX stocks for long-term investors.
Tourmaline Oil
The only silver lining in the markets this year is the energy sector. And among energy, natural gas and related stocks have gone through the roof. Canadian natural gas stock Tourmaline Oil (TSX:TOU) is one of my top picks in the energy sector. Notably, supply constraints and colder weather have pushed natural gas prices 200% higher since last year.
Tourmaline reported record cash flow growth of $618 million for Q1 2022. Higher production and much higher gas prices drove such a steep free cash flow growth in the last quarter. This facilitated another special dividend of $1.5 per share, payable on May 19.
Canada’s biggest natural gas producer has paid an industry-leading $4.21 per share dividends in the last 12 months. Furthermore, this highlights company’s strong balance sheet, healthy earnings growth outlook, and management’s focus on increasing shareholder value.
Since last year, TOU stock has returned 160%, notably outperforming TSX energy stocks. Interestingly, the recently reported quarter underlines that it is placed on a strong footing for further growth.
Dollarama
Another top-quality bet amid the inflationary environment is Dollarama (TSX:DOL). Its stable earnings profile makes it an appealing bet for long-term investors.
The discount retailer offers value to customers, especially amid slowing economic growth. Dollarama operates 1,421 stores across the country, which is way higher than its competitors. Its large geographical presence plays well for its top-line growth.
In addition, to combat inflation impact, Dollarama recently announced that it would introduce additional price points up to $5 in 2022. While its margins will still likely be negatively affected due to rising costs, a higher price point category would shield the impact to some extent.
DOL’s revenues grew by 7% CAGR in the last five years, while its net income grew by 8% CAGR. Such a stable growth effectively seeped into its stock performance and returned 80% in the same period.
Fortis
As markets turned more volatile in the last few months, TSX utility stocks are seeing renewed interest from investors. These safe havens have gained almost 10% since the war between Russia and Ukraine broke out. In the same period, TSX stocks at large have rather lost 1%.
Thus, Canadian top utility stock Fortis (TSX:FTS)(NYSE:FTS) is one classic defensive pick for long-term investors. It has a less-volatile stock that pays stably growing dividends. It currently offers a decent yield of 3.5%.
Fortis generates a majority of its earnings from regulated operations, which enables stability and predictability. It gets in a position to pay stable shareholder dividends for years. As a result, it has increased dividends for the last 48 consecutive years.
If you are looking for a stock with stable returns along and low risk, Fortis should be on top of your watchlist.
