If you are new to investing in TSX stocks, it can be overwhelming. There are literally hundreds of different stocks, exchange traded funds (ETFs), and indexes an investor can buy today. To cut through the madness, here is a simple three stock portfolio that any new Canadian investor can consider. It offers an attractive combination of income, value, and growth.
A very stable TSX utility stock
The first TSX stock to consider owning for income is Fortis (TSX:FTS). I’ll be straightforward; Fortis is not an exciting investment. However, it is a good stock to hold as an anchor in any portfolio. The company has a nearly five-decade history of annually growing its dividend.
It operates a portfolio of very sturdy and reliable regulated utilities across North America. It tends to earn a very predictable stream of earnings. It has only been growing earnings per share by around 5% a year. However, given it has a +$22 billion capital plan, it has plenty of opportunities to keep growing by that rate or even slightly above.
This TSX stock earns a 4.13% dividend yield today. It has a very good balance sheet, and its dividend is sufficiently covered. If want a low-volatility stock to collect some steady income and modest capital returns, this is the stock to hold for years.
An investment behemoth in Canada
Brookfield Corporation (TSX:BN) is a great way to get a diversified portfolio in one stock. Brookfield manages and invests capital into a diverse array of alternative assets. These include real estate, infrastructure, renewables, private equity, insurance, and debt. It owns a stake in many of these businesses, but it also collects fees and carried interest (a piece of the returns) for managing investments for large institutions.
Right now, it has over $750 billion of assets under management. It also has around $125 billion of capital that it can deploy. Brookfield typically invests in a contrarian manner. It buys marked-down assets when the economy/market look depressed, and it sells when the market recovers. Given that we are potentially heading into a recession, it may be primed for an outsized investment cycle.
Right now, Brookfield stock is down 14% over the past year. This TSX stock trades at a 25% discount to the sum-of-its-parts valuation. For a company that is expected to grow cash flows per unit by a 25% rate in 2022, that seems like an unfair discount and an attractive buy at today’s price.
A growing TSX retail stock
If Brookfield seems a little too complicated, then why not consider Alimentation Couche-Tard (TSX:ATD)? It is one of the largest owners of convenience stores and gas stations in the world. Like Fortis, it is a fairly boring business. However, it is also an essential business. Everyone needs fuel for commuting or traveling, and convenient food shops garner persistent demand.
Couche-Tard has a unique secret sauce. It is an excellent capital allocator. It earns high returns on the dollars it invests in acquisitions and internal growth.
It has compounded earnings per share by almost 20% a year since 2012. Its stock has reflected this growth by delivering a 671% total return for shareholders in that time.
At $60.15, this TSX stock is up 13% over the past year. Yet its stock is still reasonably priced at around 16 times earnings. For a growing consumer staple stock, ATD is a great stock to buy and hold for years.
