Equity outperforms most asset classes over time. Thus, one must invest a portion of their savings into stocks to create wealth in the long term. But before putting cash to work, take a pause and consider the shares of fundamentally strong companies with solid growth prospects and the ability to grow sales and earnings even at scale.
If you have a surplus savings of $5,000 and plan to invest in stocks, here are two Canadian stocks that are smart buys near the current levels. These companies have solid businesses with a growing earnings base. Moreover, they have consistently enhanced their shareholders’ returns by offering higher dividend payments. Let’s delve into stocks.
Alimentation Couche-Tard
Alimentation Couche-Tard (TSX:ATD) stock could be a solid addition to your portfolio, and there are strong reasons behind the same. For instance, it offers stability, high growth, and income.
Investors should note that the company operates convenience stores, retails fuel, and offers EV (electric vehicle) charging. Despite its low-risk business, it has a solid track record of outperforming the broader markets.
It is noteworthy that Alimentation Couche-Tard stock has appreciated over 616% in the past decade, led by its solid revenue and earnings growth (its top and bottom lines have a compound annual growth rate of 7% and 19% in the past decade). The company has regularly repurchased shares and increased dividend payments, boosting its shareholders’ value.
Alimentation Couche-Tard is a leader in the convenience store industry in Canada and has a significant presence in the U.S., Europe, and other regions. The company’s focus on strategic acquisitions has helped it expand its network and drive traffic, thus supporting its top- and bottom-line growth.
Looking ahead, Alimentation Couche-Tard’s significant scale, large store base, purchasing power, focus on cost discipline, and growing private label offering will support its revenue and earnings. Moreover, its ability to acquire and integrate companies will likely accelerate its growth rate.
goeasy
Next up is the subprime lender goeasy (TSX:GSY). The company has an impressive growth history, regardless of market conditions and multiple catalysts. Investors should note that its revenues have grown at a CAGR of 17.7% from 2012 to 2022. At the same time, its earnings increased at a CAGR of 29.5%.
Thanks to its high-quality earnings base, goeasy consistently paid and increased its dividend. Notably, goeasy is a Dividend Aristocrat, which makes it a dependable income stock. Moreover, goeasy offers a decent dividend yield of over 3.2% (based on its closing price on September 7).
In the future, goeasy is poised to capitalize on the large subprime lending market. Further, the company’s high-quality loan originations and expanded product base will drive its top line. At the same time, steady credit performance and improved operating efficiency could continue to cushion its earnings, support dividend payments, and push its stock price higher.
Considering its future growth prospects and decent yield, goeasy stock appears attractive near the current levels. It is trading at a next-12-month price-to-earnings multiple of 7.9 and offers a double-digit earnings growth, making its stock a compelling buy near the current levels.
