These 2 TSX Stocks Are Poised for Strong Earnings Growth in 2023

For investors seeking earnings growth, here’s why Restaurant Brands (TSX:QSR) and Fortis (TSX:FTS) are worth a look this year.

Chris MacDonald

Chris MacDonald has had a love for finance his whole life, ultimately leading him to pursue an MBA in finance. He's worked as a financial analyst for a number of companies in the corporate finance and venture capital space during his 10-year investing career. He endeavors to follow in the footsteps of iconic investors like Warren Buffett in building a long-term defensive portfolio.

Published May 15, 2023 8:00 pm EDT

Canadian stocks may not be the first choice for investors when it comes to generating quick short-term returns. Indeed, many of the stocks listed on the TSX are in the financials or energy sector buckets. Accordingly, these are more established, mature companies with significant earnings growth potential.

Thus, creating a list of companies set to grow their earnings meaningfully this year isn’t that difficult to do.

However, picking stocks that can continue to grow over the long term is a more difficult task. Here are three of my top picks for investors seeking earnings growth this year.

Restaurant Brands

Restaurant Brands International (TSX: QSR) is one of the leading quick-service restaurant chains in the world. It owns renowned fast-food brands such as Tim Hortons, Burger King, Firehouse Subs, and Popeyes. Currently, Restaurant Brands holds approximately 28,000 outlets across the world. The company has also expanded its business into areas such as cold beverages and espresso.

Restaurant Brands currently has a dividend yield of 3%, and it has recently announced that it will be increasing its dividend payout this year from last year’s $0.55. This will make the annual dividend payment worth 3.1% of the stock’s value. Added to that, earnings per share are supposed to increase by 14% this year. Analysts predict the payout ratio to reach 68% if the dividend trend continues.

Fortis

Fortis (TSX: FTS) has always been a top choice among investors due to its consistent dividend payments. As per a report by Wall Street in March 2023, long-term investors have made a decent return of 51% over the previous five years.

On May 4, Fortis also announced its first-quarter (Q1) 2023 net earnings of $437 million, up from $350 million last year. It reported adjusted net earnings of $0.91 on a per-common-share basis, which stood at $0.78 in Q1 2022. The result exceeded the analysts’ expectations. Fortis has beaten earnings-per-share estimates 100% of the time over the last two years.

With capital expenditures of $1.0 billion in the last quarter, FTS is planning to invest $4.3 billion for business expansion in 2023.

Conclusion

Both of these companies are the top choices among investors when it comes to earnings-per-share growth and dividend payments. So, if you add these to your portfolio during these difficult times, you might be on the gainers’ list.