It’s a great time to accumulate quality stocks. After all, Canadian names are available at an average 20% discount from their respective highs. While markets may not see a notable surge soon, it makes sense to grab top Canadian stocks that could be long-term winners.
Fortis
Canada’s top utility stock Fortis (TSX: FTS) has dropped 20% in the last six months, in line with peer utility names. Utility stocks like FTS are generally very slow-moving, and such a discount is rare. So, the current weakness is a valuable opportunity for discerned investors.
Fortis pays a stable dividend, yielding 4%. FTS may underperform broader markets in the short term. However, if your investment horizon is more than five years, FTS is an apt bet. In the last 10 years, Fortis has returned 8.5% compounded annually, including dividends.
Notably, Fortis’ earnings visibility and dividends stand tall in these uncertain markets. Even if a recession happens next year, the utility company will likely keep paying handsome dividends.
The recent correction in FTS stock was largely a result of rapid rate hikes this year. However, when the policy tightening cycle stops or inverts, Fortis stock should see a decent recovery.
Canadian Natural Resources
Energy is perceived as one of the risky sectors due to its strong correlation with oil and indebtedness. However, things have turned upside-down since the pandemic owing to higher energy prices. One name that looks attractive for the long term is Canadian Natural Resources (TSX: CNQ).
Its scale and strong operational execution, coupled with higher oil prices, will likely drive shareholder value. However, energy investors should be aware of the immense oil price volatility. So, oil prices may not remain this high three years down the line. Still, Canadian Natural Resources looks like an appealing bet, given its strong balance sheet and stable dividends.
CNQ has achieved massive deleveraging in the current oil price rally, substantially strengthening its balance sheet. Plus, it pays stable dividends that currently yield 4%. Management has raised dividends for the last 23 consecutive years, a rare feat in a risky industry. Note that CNQ kept raising shareholder payouts even during the pandemic when peer energy companies suspended or trimmed their dividends.
Royal Bank of Canada
Though Royal Bank (TSX: RY) stock has somewhat recovered of late, it is still trading 13% lower to its all-time high early this year. This could be an attractive opportunity as the policy tightening cycle seems nearing an end. Record-high inflation and steep rate hikes have notably weighed on TSX bank stocks this year.
However, Royal Bank is one of the fundamentally solid names among the Big Six Canadian banks. The Big Six bank stands out amongst its peers for its scale and earnings stability. RY stock currently yields 4%, in line with its peers. One may not get rich overnight with Royal Bank. RY is an appealing bet but for the longer term. Indeed, RY stock has returned 13% compounded annually in the last 10 years, including dividends.
