My Favourite Investing Ideas on the TSX Today

Investors can bet on TSX energy and bank stocks using these two ETFs.

| More on:
ETF chart stocks

Image source: Getty Images

The TSX has outperformed its U.S. counterpart so far in 2022. Year to date, the S&P/TSX 60 index is down just -6%, compared with the -16% loss suffered by the S&P 500. Thanks to its high concentration of energy sector stocks, the TSX has largely escaped the corrections and bear markets of the U.S. stock market.

I’m not an active investor, but if there were two TSX sectors I’d consider over-weighting, it would be banks and energy. Both sectors have historically provided strong dividend yields and growth, and can outperform when interest rates and inflation rise.

While investors can buy individual TSX-listed bank and energy stocks (and my fellow Foolish writers have some great recommendations), I’m sticking to my roots via exchange-traded funds, or ETFs. The following two ETFs offer easy, one-click access to a portfolio of TSX energy and bank stocks.

BMO S&P/TSX Equal Weight Bank Index ETF

Canada’s “Big Six” banks currently include the Royal Bank of Canada, Toronto-Dominion Bank, Canadian Imperial Bank of Commerce, Bank of Nova Scotia, Bank of Montreal, and National Bank. A great way to own all six banks in equal portions is via the BMO S&P/TSX Equal Weight Bank Index ETF (TSX:ZEB).

ZEB trades at around $35 per share, which costs significantly less than buying equal amounts of shares of all six banks individually. Another advantage of ZEB is its monthly dividend. While bank stocks typically pay quarterly dividends, ZEB pays out more frequently, which can be desirable for income investors.

Currently, ZEB pays an annualized distribution yield of 4.15%, which can be thought of as the average dividend yield of the underlying six banks. In terms of fees, ZEB charges an expense ratio of 0.28%, which works out to around $28 for every $10,000 invested.

BMO Equal Weight Oil & Gas Index ETF

Investors bullish on TSX energy stocks can buy most of them easily via the BMO Equal Weight Oil & Gas Index ETF (TSX:ZEO). This ETF holds 10 TSX energy stocks in equal weights, much like ZEB does with bank stocks. At a price of $67 per share, it’s a very affordable and efficient way to invest in energy stocks.

Top holdings currently include Canadian Natural Resources, Suncor Energy, Cenovus Energy, Tourmaline Oil, Imperial Oil, Arc Resources, TC Energy, Pembina Pipeline, Enbridge, and Keyera. Most of these stocks strongly outperformed during 2022 as commodity prices rose.

If you believe that we’re starting another commodity super-cycle, then ZEO could be a way to participate in that growth. Or, it could be an inflation hedge to keep in your portfolio when commodity prices inevitably soar again in the future. ZEO costs an expense ratio of 0.61%.

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 Tony Dong has no position in any of the stocks mentioned. The Motley Fool recommends BANK OF NOVA SCOTIA, CDN NATURAL RES, Enbridge, KEYERA CORP, and PEMBINA PIPELINE CORPORATION. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Dividend Stocks

TFSA: How to Invest $88,000 to Get $5,450/Year in Passive Income

Top TSX dividend stocks such as Enbridge can be held in your TFSA to benefit from steady payouts and capital…

Read more »

edit Sale sign, value, discount
Dividend Stocks

3 Cheap Dividend Stocks (Down Over 30%) to Buy in January 2023

Given their discounted stock prices and high yields, these three cheap dividend stocks could be attractive for income-seeking investors.

Read more »

A worker drinks out of a mug in an office.
Dividend Stocks

TFSA Investors: Earn Passive Income With 3 Blue-Chip Stocks

TFSA investors can worry less about a recession and earn passive income with three blue-chip stocks as core holdings.

Read more »

Hourglass projecting a dollar sign as shadow
Dividend Stocks

Is Now the Right Time to Buy Consumer Discretionary Stocks?

Investors cannot paint consumer discretionary stocks with a wide brush. Each stock must be investigated individually. Here's why.

Read more »

Golden crown on a red velvet background
Dividend Stocks

2 Ultra-Stable Canadian Stocks Just Crowned as Dividend Aristocrats for 2023

Waste Connections (TSX:WCN) stock and another Dividend Aristocrat could help investors crush the markets in 2023.

Read more »

Golden crown on a red velvet background
Dividend Stocks

Create $200 in Passive Income Every Quarter From 1 Defensive Stock

Risk-averse investors can seek safety in a defensive stock and earn more in passive income in 2023 and beyond.

Read more »

railroad
Dividend Stocks

Slow and Steady: Buy this Railroad Stock Now to Win the Race

Investors looking for a solid and growing income should pick up shares in this railroad.

Read more »

retirees and finances
Dividend Stocks

RRSP Investors: Should You be Worried During a Recession?

RRSP savers might feel like gagging as they watch their investments fall, but stay strong! Especially with these TSX stocks.

Read more »