The Canadian stock market got off to a hot start to the year and is currently nearing all-time highs. The S&P/TSX Composite Index surged more than 5% last month and is now less than 10% below all-time highs that were set in early 2022.
Despite the strong start to the year, I remain cautious in the short term. Interest rates and inflation remain far higher than pre-pandemic levels and could very well stay that way through the remainder of the year.
I may be cautious but that doesn’t mean I’m not investing, though. The reason is that my investing time horizon is a long one, which allows me to not be overly concerned with volatility in the short term.
While I am continuing to invest in today’s volatile conditions, I have slightly changed my approach. With interest rates as high as they are, I’m much less interested in high-growth unprofitable growth stocks, which have typically made up a meaningful part of my portfolio. Today, I’m looking to load up on dependable, well-priced companies that can help balance out my growth-oriented holdings.
Here are three top value stocks on my watch list right now.
At a $40 billion market cap, Sun Life (TSX:SLF) is a Canadian leader in insurance and wealth management services. The company also boasts a growing international presence, with Asia expected to be a significant growth driver for the company in the coming years.
They may not be the fastest-growing industries, but insurance and wealth management certainly are dependable. And that’s exactly what you get with Sun Life.
Even with the value stock nearing a 52-week high, shares are still priced at a very reasonable forward price-to-earnings (P/E) ratio of 10. Not many other TSX stocks with a track record like that of Sun Life are trading at a valuation like that.
In addition, Sun Life’s annual dividend of $2.88 per share yields above 4% at today’s stock price.
When it comes to dependability, utility stocks are difficult to compete with. Due to the dependable nature of the utility industry, demand tends to remain fairly stable, which explains why most utility stocks enjoy low levels of volatility.
After a loss-filled second half to the year in 2022, Fortis (TSX:FTS) has found itself trading more than 10% below 52-week highs. Still, shares have managed to remain on par with the returns of the broader Canadian stock market over the past five years.
Similar to Sun Life, Fortis’s dividend is also currently yielding above 4%.
Shares of Telus (TSX:T) have been trending gradually downwards since early 2022. The stock is currently priced close to 20% below all-time highs set last April.
Telus’s forward P/E ratio of above 20 does come at a premium compared to the first two companies I reviewed. But in addition to a 5% dividend yield, the telecommunications company offers investors the potential of earning market-beating returns.
Although shares have trailed the market’s returns over the past five years, the expansion of 5G technology has many betting that it won’t be long before Telus is once again outperforming the market.
For what may seem like a slow-growing telecommunication company, there’s a lot to like about this value stock.