Are you just starting investing? Here are some popular Canadian stocks for you to explore.
There’s good reason why Royal Bank of Canada (TSX:RY) is popular among beginner investors, particularly ones who are conservative. Other than being a leading bank in Canada, the blue-chip stock is also characterized by a diversified business.
Its revenue diversification across its three-largest business segments last fiscal year was 40% in personal and commercial banking, 30% in wealth management, and 18% in capital markets. It also focuses its operations in Canada (59% of fiscal 2022 revenue) and the United States (25%).
By parking savings they don’t need for years in RBC stock, investors are likely to earn a reliable solid long-term return. Its 10-year total returns are about 10.9% per year. The bank stock increased its dividend by 8.1% per year over the last decade. Its earnings per share more than kept pace by increasing 8.4% per year in the period. So, its payout ratio remains sustainably healthy at about 49%.
At $131.44 per share at writing, Royal Bank stock yields 4%. The stock continues to trade at a premium to its peers and appears to be fairly valued. Therefore, the continued shakeup in the banking sector (most obviously the U.S. regional bank crisis) as well as an expected recession this year could weigh on the stock, providing a better buying opportunities for investors.
The concern about an upcoming recession has led to investors flying to quality. For example, Fortis (TSX:FTS) stock witnessed a rebound of about 22% since its low of roughly $49 per share in October 2022.
The diversified regulated utility produces predictable results that has driven a durable dividend-growth streak of almost half a century. For reference, its 10-year dividend-growth rate is 6.1%. Fortis is as large and diversified as ever! It has a rate base of $36 billion this year that is set to grow to $46 billion by 2027 via a low-risk capital plan.
At $59.60 per share at writing, Fortis stock is fully valued and offers a safe dividend that yields 3.8%. Patient investors should wait for a better margin of safety. For instance, you can see if you can buy on a dip to at least $56.
Given its higher dividend yield of just over 6.7%, Enbridge (TSX:ENB) stock could be a reasonable buy for investors who need current income. This relatively high income can complement Guaranteed Investment Certificates (GICs) that offer interest rates of about 5%.
The blue-chip stock offers a bit of growth as well. Over the next few years, it’s likely to continue growing its dividend healthily by 3-5% per year. At $52.54 per share at writing, analysts believe ENB stock trades at a discount of approximately 10%. Therefore, there’s a good chance between its big dividend and a bit of growth and valuation expansion, it can deliver total returns of about 10% per year over the next few years.
Of course, if the large energy infrastructure stock dipped to about $50, it would be an even better buy for income and total returns.
Food for thought
These dividend stocks are popular for good reason. With a long-term investment horizon, you’re likely to make money but not the most money (because they’re popular). In other words, beginner investors should be careful of the valuation they pay for the stocks and aim to buy on dips to capture a better margin of safety.