Better Buy: 2 Stocks or 500 Shares?

Stocks and shares can mean the same thing, although knowing the difference can help you determine the potential returns.

| More on:
analyze data

Image source: Getty Images

A stock is a slice of ownership in a publicly listed company, although it could also mean a share or shares. However, veteran investors would know the difference between the interchangeable terms. Stock is a general term that’s usually synonymous with or connotes a publicly traded company. On the other hand, shares are more precise since they refer to the actual units of stock.

Assuming you buy 500 shares of Enbridge (TSX:ENB)(NYSE:ENB), you would say I have an investment in the energy infrastructure company. However, if you purchase 250 shares of Enbridge and 250 shares of the Royal Bank of Canada (TSX:RY)(NYSE:RY), you now own two stocks with a combined total of 500 shares.

Public listing

The common denominator of Enbridge and RBC is that both are issuers of shares. Companies list on the stock market or go public to raise capital for growth and expansion. Also, the public listing enhances visibility and boosts the trust of stakeholders.

Retail and institutional investors then purchase shares of the companies to make money when the value of the underlying businesses increases. Since Enbridge and RBC both trade on the Toronto Stock Exchange (TSX) and New York Stock Exchange (NYSE), Canadians and Americans can invest in Canada’s top-tier energy stock as well as the country’s largest bank.  

Total spending

At their current share prices, you’d spend $13,577.50 to own 250 shares of Enbridge ($54.71 per share). RBC trades ($123.04) higher so you’d shell out more, or $30,760 for 250 shares. If you buy the energy stock only, the cash outlay is smaller ($27,155) because of the price difference. Stock prices move up, down, or sideways and are driven by various factors, including supply and demand.  

Most investors invest in two or more stocks to diversify. You spread the risks by holding shares of different companies instead of only one company. Energy and financial are TSX’s heavyweight sectors, although the former (+45.42%) has outperformed the latter (-12.36%) year to date. Individually, Enbridge is up 15.1% year to date, while RBC is down 5.8%.

Blue-chip assets

Enbridge and RBC are mature and established Canadian companies. Besides the capital gains from price appreciation, investors in either stock earn recurring income from dividends. Both companies share a portion of earnings or profits with shareholders through dividend payments.

The $109.9 billion energy infrastructure company is a dividend aristocrat owing to its dividend growth streak of 26 consecutive years. If you invest today, the dividend yield is 6.33%. Your 250 shares will generate $214.86 in passive income every quarter. Enbridge has a $10 billion diversified secured growth program that should drive future growth.

RBC has a dividend track record of 152 years and its market capitalization stands at $171.24 billion today. The Big Bank stock pays an attractive 4.29% dividend yield. A $30,760 position (250 shares) will produce $322.21 every quarter. While net income in Q3 fiscal 2022 fell 17% to $3.6 billion versus Q3 fiscal 2021, management said RBC operates from a position of strategic and financial strength.

Stocks and shares

It helps to know the difference between stocks and shares, but it shouldn’t distract you from the ultimate goal. You invest in companies to make profits through capital gains and/or earn dividend income. The amount of shares is an important number when calculating your potential returns and how much of each stock to allocate to your portfolio.

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 recommends Enbridge.

More on Stocks for Beginners

Gas pipelines
Stocks for Beginners

3 Reasons to Buy Enbridge Stock Like There’s No Tomorrow

Enbridge (TSX:ENB) is a superb long-term option. Here's why you should buy Enbridge stock right now and hold it for…

Read more »

growing plant shoots on stacked coins
Stocks for Beginners

1 Copper Stock to Buy as Copper Prices Shine

The price of copper continues to climb, and more copper production is on the way for this top stock up…

Read more »

Business success with growing, rising charts and businessman in background
Stocks for Beginners

2 Top TSX Growth Stocks to Buy Today and Hold for 10 Years

Are you looking for top-performing TSX stocks to hold for a decade? Topicus.com and goeasy could really pay off for…

Read more »

young woman celebrating a victory while working with mobile phone in the office
Dividend Stocks

This Dividend Stock Just Jumped 10%! Time to Buy?

This dividend stock is way up after being included in a major index, making it a prime time to pick…

Read more »

Pile of Canadian dollar bills in various denominations
Stocks for Beginners

Up 94% in 2024! 3 Reasons Celestica Stock Is (Still) a Screaming Buy Today

Here are the top three reasons that could help Celestica stock continue soaring in the long run.

Read more »

sale discount best price
Stocks for Beginners

Time to Pounce: 1 Phenomenal TSX Stock That Hasn’t Been This Cheap in a While 

Buying the dip of a phenomenal cyclical stock could generate fantastic returns. Here is a cheap TSX stock in its…

Read more »

financial freedom sign
Stocks for Beginners

Could This Undervalued Stock Make You a Millionaire One Day? 

The TSX has good millionaire-maker stocks if you wait. This futuristic stock might look undervalued once you see its growth…

Read more »

Aerial view of a wind farm
Energy Stocks

Brookfield Renewable Stock Climbs Higher: Time to Buy?

Brookfield Renewable stock (TSX:BEP.UN) continues to climb, but remains below the $40 mark. But that share price looks in view.

Read more »