Got $1,000? Buy These Up-and-Coming Stocks Before They Take Off

These growth stocks beat the long-term market returns and could continue delivering above-average growth in the coming years.

| More on:
Target. Stand out from the crowd

Image source: Getty Images

If you’ve got an extra $1,000, here are a couple of up-and-coming stocks from different sectors that you should consider buying shares of before they take off. Let’s explore the growth potential of these top TSX stocks that have beat long-term market returns. Illustrated below is the five-year total return of the stocks versus the Canadian stock market (using iShares S&P/TSX 60 Index ETF as a proxy).

BEP.UN Total Return Level Chart

BEP.UN, GSY, and XIU Total Return Level data by YCharts

Invest safely in renewable energy

We’re in a multi-decade decarbonization trend, and Brookfield Renewable Partners (TSX:BEP.UN) is in the right places. It’s a large global renewable energy platform with its tentacles stretched across continents and major technologies. Its total installed capacity is approximately 24,000 megawatts (MW) with about 102,000 MW in its pipeline, of which it expects 11,800 MW to be in service over the next three years.

At the end of the third quarter, it had its technologies diversified across hydro power (52% of cash flow), wind (21%), solar (15%), and distributed energy and sustainable solutions (12%). About 63% of its cash flow is generated in North America, 20% in South America, 15% in Europe, and 2% in Asia.

Importantly, the renewable energy stock is growing with a sustainable dividend. About 94% of its cash flow is under long-term contracts — the average term being 14 years. It has been increasing its cash distribution for over a decade with a 10-year dividend-growth rate of 5.7%.

The 17% stock correction over the last 12 months is a good entry point for investors to start with an initial yield of over 4.4%. Analysts believe the stock is discounted by roughly 27%. BEP is largely financed by fixed-rate debt, so it has virtually been unaffected by rising interest rates.

Buy goeasy stock before it takes off

The leading Canadian non-prime consumer lender, goeasy (TSX:GSY), is committed to growing its consumer loan portfolio by about 54% to almost $4 billion by the end of 2025.

In the first nine months of the year, it reported record revenue and operating income, which increased 26% and 27%, respectively, year over year. Its adjusted earnings were up 11% to $7.66 per share. Adjustments were made on the LendCare acquisition, corporate development costs, and fair value mark-to-market impact on investments to show the earnings power of the company.

The company recently established a $200 million revolving securitization facility that’s collateralized by automotive consumer loans and successfully completed a bought deal financing, raising gross proceeds of $57.9 million, which increased its liquidity and enhanced its financial position.

goeasy is a younger Canadian Dividend Aristocrat than BEP. However, its 15-year dividend-growth rate of 17.3% is absolutely impressive. The stock’s valuation bubbled last year, which is the primary reason for its stock correction of 30% in the last 12 months.

Currently, I believe the stock is reasonably valued for long-term, double-digit growth potential. It also offers a dividend yield of about 3%. Nine analysts have a consensus 12-month price target of $198 on the stock, though, which suggests an attractive discount of 38%.

The Foolish investor takeaway

Both stocks are trading at good valuations and in growing sectors. Additionally, they’re expected to pay nice dividends and increase their payouts over time. Between the two, goeasy is a higher-risk stock due to its non-investment-grade S&P credit rating of BB- versus BEP’s investment-grade S&P credit rating of BBB+.

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 Kay Ng has positions in Brookfield Renewable Partners and goeasy. The Motley Fool recommends Brookfield Renewable Partners. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Dividend Stocks

3 Canadian REITs That Pay Out Every Month

$10 can buy you a stake in a REIT that pays monthly distributions yielding 8.2% annually. CT REIT and another…

Read more »

A meter measures energy use.
Dividend Stocks

3 Reasons to Buy Utility Stocks in 2023

Here's why adding utility stocks to your portfolio is a smart idea, as we face significant uncertainty in 2023.

Read more »

Modern buildings in business district
Dividend Stocks

2 Top Residential REITs to Buy in February 2023

These two top residential REITs to buy offer attractive passive income as well as long-term growth potential.

Read more »

Simple life style relaxation with Asian working business woman healthy lifestyle take it easy resting in comfort hotel or home living room having free time with peace of mind and self health balance
Dividend Stocks

TFSA Investors: Make $102/Month Without Lifting a Finger

Here’s an amazing monthly Canadian dividend stock that can help TFSA investors earn reliable passive income for years.

Read more »

IMAGE OF A NOTEBOOK WITH TFSA WRITTEN ON IT
Dividend Stocks

TFSA Passive Income: Earn $129/Month Tax Free

Do you seek passive income? Leverage your TFSA to earn tax-free passive income via these Dividend Aristocrats.

Read more »

Silver coins fall into a piggy bank.
Dividend Stocks

How to Invest $23,000 in 2023 to Create Passive Income

Here's how income-generating cash cows such as Canadian Utilities and TC Energy can help you earn over $1,000 in annual…

Read more »

Early retirement handwritten in a note
Dividend Stocks

2 High-Dividend Stocks to Buy Today for Early Retirement

You can buy these two high-dividend Canadian stocks right now to help you plan an early retirement from work.

Read more »

worry concern
Dividend Stocks

Worried About Market Downturn? Buy This High-Yielding (6.3%) Dividend Stock

The stock market has been pretty volatile lately. It’s better to have a balanced portfolio that can perform in every…

Read more »