New to Investing? The 2 Top Stocks to Buy Right Now

New investors should highly consider investing in quality dividend stocks that are on sale in this market correction.

| More on:
A worker drinks out of a mug in an office.

Source: Getty Images

Are you new to investing? Don’t gamble your money because you could lose your hard-earned savings. You don’t have to take excessive risk when investing in the stock market.

You’re in luck because the stock market has corrected this year. A bunch of quality stocks are cheaper year to date, making it appealing for new investors to put excess cash into these discounted stocks. You can further lower your risk by buying cheap dividend stocks. Dividends are profits potentially shared by publicly traded companies in the form of cash payments.

Moreover, dividends are more favourably taxed than your job’s income, foreign income, or interest income. So, it makes good sense to invest in dividend stocks.

Here are some top dividend stocks to buy right now for folks who are just starting investing.

RBC stock is a solid starter stock for new investors

Royal Bank of Canada (TSX:RY)(NYSE:RY) is a financial conglomerate that leads a stable, diversified business. It operates in 29 countries and serves more than 17 clients, but its core business is in Canada. It boasts leading positions in all key product categories across Canadian banking. According to J.D. Power, RBC has the highest customer satisfaction among the Big Five retail banks. Its key business segments include personal and commercial banking, wealth management, capital markets, and insurance.

At $124.86 per share at writing, RBC stock trades at about 11.1 times earnings, which is a discount of about 10% from its long-term normal valuation. The bank aims for an earnings-per-share (EPS) growth rate of at least 7% over the next three to five years. It also targets an impressive return on equity (ROE) of over 16%, which aligns with its five-year ROE of 16.7%.

The bank stock pays a safe dividend yield of 4.1%. Combined with a growth rate of at least 7%, buyers of the dividend stock today can get approximated long-term returns of about 11% per year. This is an attractive estimated return, seeing as the Canadian stock market’s average long-term returns is about 7%. Additionally, RBC stock is a low-risk stock that has little uncertainty and increases its EPS in the long run. Its valuation expansion can further boost its return.

New to investing? Buy real estate stocks for income

Real estate is another great source of income. Buying individual properties costs a lot. Most investors will likely need to get a mortgage and pay interest as a result. You’ll also need to manage the properties, including maintaining the property maintenance and catering to tenants. To earn passive income with no debt weighing on your shoulders, you can consider investing in real estate investing trusts (REITs) that have gone on sale from rising interest rates.

One interesting REIT is Canadian Net REIT (TSXV:NET.UN) that invests in commercial properties in Eastern Canada. It has strong evidence of a low-risk business model. It maintains a high occupancy rate of close to 99% and increases its cash flows and cash distributions to unitholders through economic cycles.

The stock trades at $6.91 a unit at writing. The average analyst 12-month price target is $9, across six analysts. That’s an upside potential of 30% in the near term. It pays a nice 4.9% yield for the wait in the form of a monthly cash distribution. The stock’s five-year cash-distribution growth rate is 13.3%, which is superb.

If you study the income stock more closely, you’ll love its fundamentals and discounted stock. However, one thing you won’t like is its low trading volume, which makes it an illiquid stock. Most investors want to buy stocks that they can buy and sell easily. It wouldn’t be as easy to buy or sell Canadian Net REIT units because of its low trading volume. This is not a problem if you plan to buy and hold it for passive income, say, in your Tax-Free Savings Account.

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.

The Motley Fool recommends Canadian Net Real Estate Investment Trust. Fool contributor Kay Ng owns shares of Canadian Net REIT.

More on Dividend Stocks

grow money, wealth build
Dividend Stocks

3 TSX Stocks to Make the Perfect Passive Income Portfolio

If you're an investor who wants to set it and forget it, these three TSX stocks are ideal for your…

Read more »

Man making notes on graphs and charts
Dividend Stocks

TFSA Investors: Where to Invest $6,000 This Year

Here are two top TSX stocks that could outperform broader markets in the long term.

Read more »

Golden crown on a red velvet background
Dividend Stocks

A Canadian Dividend Aristocrat That’ll Pay Passive Income Investors Through a 2023 Recession

CIBC (TSX:CM)(NYSE:CM) stock looks like a dividend bargain to pick up right now.

Read more »

hand using ATM
Dividend Stocks

Should You Buy Royal Bank Stock at Current Levels?

RY stock has dropped 20% since January, underperforming broader markets. Is Canada's biggest bank still a buy?

Read more »

edit Safety First illustration
Dividend Stocks

2 Safe Stocks to Own and Keep Receiving Passive Income

Canadian investors will likely keep receiving rock-steady passive income from two Dividend Aristocrats, notwithstanding the intensifying market pressure.

Read more »

Increasing yield
Dividend Stocks

3 TSX Stocks With High Dividend Yields

Due to their stable cash flows and high dividend yields, these three stocks are excellent buys in this volatile environment.

Read more »

Upwards momentum
Dividend Stocks

3 Strong Buys Right Now With Growth Prospects Intact

Three TSX stocks are strong buys right now because the companies' growth prospects are intact despite the shaky market environment.

Read more »

Profit dial turned up to maximum
Dividend Stocks

Get More Income From This REIT Selloff

Income investors can build their Canadian REIT positions slowly over this downturn to lock in high yields.

Read more »