Keeping some of your savings as cash in one or both registered accounts (Tax-Free Savings Account and Registered Retirement Savings Plan) is a good idea. This allows you to pick up low-hanging fruits like undervalued stocks that might be on their way to turning things around. But that’s just one asset type worth considering.
At any given time, the market has many great picks for virtually all types of investors. Some might look for uncharacteristically robust growth, while others may be hunting high yields.
May 2023 is no exception, and although several good candidates are available for this month, two of them stand out, albeit for different reasons.
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A high-yield stock
Real estate investment trusts (REITs) are known for their high yields, but double digits are rare, even in this market segment. However, a heavily discounted NorthWest Healthcare Properties REIT (TSX:NWH.UN) is among the few currently trading on the stock market that has achieved this feat.
The REIT has sunken over 44% from its 2022 peak, and the slump continues. The stock is heavily discounted, and as a natural consequence, the yield has reached an attractive level at 10%.
At this REIT, even with a modest $1,500 investment, you may be able to generate a yearly income of about $150. But the natural question to ask is whether the dividends are sustainable at this yield. The answer is relatively complicated.
The payout ratio is close to 300%, although the REIT has sustained an even higher ratio and maintained its payouts in the past (2018). The financials are not exemplary, but they are not too weak either.
More importantly, the underlying business model and its inherent strengths, like an international presence and a compelling weighted average lease expiry of 14 years (which endorses its long-term potential) are still solid.
A financial stock
When you are choosing investments from the financial sector, bank stocks are a natural first pick for most investors. But a more compelling choice for May 2023 would be goeasy (TSX: GSY), the private lender that has been going up since the beginning of the month and was already up about 24% by the middle of May.
The stock is still heavily discounted, trading at a price almost 50% lower than its 2021 peak. Two positive consequences of this discount are its attractive valuation and the dividend yield, which is currently at 3.49%. But its long-term growth potential is an even more compelling reason to buy this stock.
Even in its discount state, the company’s last 10-year returns (just price appreciation) stand at 1,000%. If the stock is finally recovering and reclaiming its past growth pace, it may prove to be a powerful addition to your portfolio.
Foolish takeaway
The two stocks are worth considering for your $3,000 capital for different reasons. NorthWest is a good buy for its dividend yield, while goeasy may significantly boost your portfolio with its recovery and growth potential. Buying them now before their appeal starts wearing thin would be the smart thing to do.
