For investors looking to build a solid blue-chip stock portfolio, they should dig deeper into the best of the best this month. Here are three of the best Canadian stock ideas for your list.
Loblaw stock
Loblaw (TSX: L) is a blue-chip stock in the consumer staples sector. In the last 10 years or so, the stock delivered solid annualized returns of about 15.4% with little downside in any given year. Its Sharpe ratio, in the period, was 0.89, which is higher than the Canadian stock market’s 0.67. The stock also has little market correlation. It means Loblaw stock may be a good candidate to help diversify investors’ portfolios.
You might recall that it acquired Shoppers Drug Mart in 2013. Today, the company provides grocery, pharmacy, health and beauty, apparel, general merchandise, credit card services, and wireless mobile products and services.
Loblaw consists of over 1,000 grocery stores that span from discount to specialty offerings. For example, its subsidiaries include Extra Foods, T&T, Superstore, No Frills, etc., to name a few. Additionally, it has more than 1,300 Shoppers Drug Mart and Pharmaprix locations, and over 300 Lifemark clinics. It also offers the PC Mastercard, Joe Fresh clothing, and top consumer brands: Life Brand, no name, and President’s Choice.
At $123.83 per share, the top food stock trades at a small discount of about 12% and offers a safe dividend yield of 1.3%. For reference, the consumer staples stock has increased its dividend for 11 consecutive years with a 10-year dividend-growth rate of 6.4%.
TD Bank stock
Because of the global banking shakeup, Toronto-Dominion Bank (TSX: TD) stock is on sale from a long-term investing perspective. In the near term, risks are heightened from an increased likelihood of a recession and an expected higher levels of bad loans in a higher interest rate environment.
TD Bank has a leading position in retail banking, and it generates quality earnings. In a normal economy, it should be able to bring in net income of north of $17 billion.
At $82.68 per share, the bank stock trades at a nice discount of 20% from its normal valuation based on its normalized earnings power. For your reference, TD stock has also increased its dividend for 12 consecutive fiscal years with a 10-year dividend-growth rate of 9.4%. Offering a dividend yield of 4.6%, TD stock is an excellent buy today.
Brookfield Renewable
Brookfield Renewable Partners (TSX: BEP.UN) is a part of the greening the planet movement. It expects to have growth opportunities through the next three decades in building renewable power operations globally. Management targets funds-from-operations-per-unit growth of about 10% per year, which would provide enough cash flows for 5-9% cash distribution growth and leave resources for reinvesting into the business.
In the last decade or so, the stock delivered market-beating annualized returns of about 14.9%. Its Sharpe ratio, in the period, was 0.73, which is higher than the Canadian stock market’s 0.67. So, it provided better risk-adjusted returns than the market. However, the stock has had certain years of large appreciation as well as large declines. For instance, in the period, its best year witnessed returns of 80% and the worst year saw a loss of 24%.
At US$30.44 per unit, the stock trades at a discount of about 20% and offers a yield of 4.4%.
