Where to Invest $1,000 in December 2023

A $1,000 investment is enough to earn dividends or realize capital gains from two TSX stocks

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Stock investing is an option if you want your limited funds to produce the highest returns. You can start with a small capital and earn two ways, from dividends and price appreciation.

For example, Headwater Exploration (TSX:HWX) trades at less than $10 ($6.50 per share) but pays a juicy 6.15% dividend. A $1,000 investment will generate $15.38 every quarter. The higher your holdings, the larger your quarterly passive income would be.

H2O Innovation (TSX:HEO) is a non-dividend payer with market-beating returns. The share price is only $4.24, but the year-to-date gain is 65%. Had you invested $1,000 on year-end 2022 ($2.57 per share), your money would be $1,649.81 today.

Energy

Headwater Exploration is a petroleum and natural gas producer conducting exploration, development, and production operations in Martin Hills and in the McCully Field. The $1.53 billion resource company takes pride in its asset quality and balance sheet strength.

The business thrives, as evidenced by the impressive quarterly results. In the third quarter (Q3) of 2023, sales and net income rose 51.7%and 57.5% to $144 million and $49.7 million. Notably, cash flow from operations increased 19% to $85.5 million from a year ago. Also, the average production of 18,027 barrels of oil equivalent per day is a new company record.

Management said the favourable drilling conditions in 2023 enabled the company to accelerate or advance some planned drilling activities from 2024 to Q4 2023. It also prompted the board of directors to approve a $10 million expansion to this year’s $225 capital budget.

Headwater Exploration started paying dividends only in November 2022. If you invest today, the annual dividend per share is $0.40. The payments should be sustainable, given the 62.5% payout ratio. Management intends to grow the quarterly dividends by growing the production base.

This energy stock has produced superior returns in 3.01 years. The 239.25% overall gain represents a 50.15% compound annual growth rate.

Utilities

H2O Innovation flies under the radar, but investors’ interest should heighten due to the utility stock’s outperformance against massive market headwinds. The $381.6 million company provides complete water solutions and uses best-in-class technologies and services.

Three core business segments contribute to revenues. The Water Technologies & Services (WTS) delivers equipment and services to municipal and industrial water, wastewater, and water reuse customers. Its Specialty Products (SP) unit manufactures and supplies specialty chemicals, consumables and engineered products for the global water treatment industry.

The Operations & Maintenance (O&M) segment handles contract operations and services related to water and wastewater treatment systems. Management notes a positive trend in the company’s operating profit to start fiscal 2024.

In the three months that ended Sept. 30, 2023, revenue grew 5.7% to $59.3 million versus Q1 fiscal 2023, although net loss was $0.4 million compared to breakeven earnings a year ago.

H2O Innovation’s president, chief executive officer, and co-founder, Freddie Dugré, said the high-recurring revenue business model and backlog growth should help the company achieve targets in its three-year plan.

No discrimination

The TSX is not exclusive to moneyed individuals and corporations. Everyone has equal chances of making money regardless of investment amount. You can put your $1,000 to good use with Headwater Exploration or H2O Innovation.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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