Canadian stocks haven’t done well in 2023, and that’s after a very poor 2022. The last few years, however, was a different story. We went through a horrible pandemic, with restrictions bringing many companies to their knees. Yet investors had cash on hand to invest, leading to a surge in the market.
This continued into the early days of 2022, only to start dropping off the face of the earth as inflation rose. And now here we are, about a year on, and we haven’t even entered a recession yet.
That being said, a recession may be due for the summer. And after we hit rock bottom some time in the summer, according to economists, there will be a recovery. In the case of these two Canadian stocks, that recovery could completely course-correct these share prices.
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Nutrien stock
Nutrien (TSX: NTR) was one of those companies that surged right at the end of pandemic restrictions and the growth market. The stock is one of the few companies out there offering potash and crop nutrients. When Russia invaded Ukraine, those prices surged, leading to a surge in share price as well.
Yet with inflation and interest rates rising, investors wanted their returns and took them. After hitting all-time highs around $140 per share, Nutrien stock fell from favour. Shares are down a whopping 31% in the last year and steady with where they were at the beginning of 2023.
Part of the continued drop comes down to the company missing earnings estimates quarter after quarter. Last year proved a hard one, after it’s been seeing a massive increase in sales from its e-commerce solutions through the pandemic. That being said, it achieved record net earnings for 2022 and increased its dividend by 10% as well.
Investors should think long-term for this company. The stock continues to merge a fractured industry and believes it can continue achieving record results. The company issued full-year 2023 guidance for adjusted earnings before interest, taxes, depreciation, and amortization at between US$8.4 and US$10 billion. This would be helped by the “ramp up” of its low-cost potash capacity.
Nutrien stock could certainly be one of the Canadian stocks to rebound in 2023 should this occur. Shares trade at just 5.27 times earnings, offering a 2.84% dividend yield as of writing.
TD stock
Canadian banks are also in a precarious position, as they usually fall during a recession as well. This is likely to continue in the near future and throughout the summer. But if you think Canadians are suddenly going to rush the banks and take out their funds, it’s not going to happen.
The United States is a very different place compared to Canada, and yet investors treat them the same. There is just far more competition south of the border, leading to Americans taking out their cash to put it in another, more stable bank.
Here in Canada, there is less competition, and far more stable revenue flow. That includes for Toronto-Dominion Bank (TSX: TD), even though it’s one of the largest banks in America. It continues to have provisions for loan losses available and is the second-largest bank in Canada. It also continues to diversify its business through credit card partnerships, capital markets, loan offerings and more.
So, yes, the company is likely to post some less-than-stellar earnings in the short term. The long term, however, will be another story. Shares are down 12% in the last year and 5% year-to-date, trading at 10.1 times earnings. This is therefore a great time to get in on the company’s 4.61% dividend yield among Canadian stocks. And it’s sure to course correct in 2023 after a recession occurs, just as it has over the last few decades.
