The Canadian equity markets have begun 2024 on a weaker note, with the S&P/TSX Composite Index closed in red in the first two days of trading. Amid the uncertainty of when the Federal Reserve will start cutting its benchmark interest rates, the equity market has been under pressure. Analysts predict the global economy will slow down this year amid the impact of monetary tightening initiatives. So, I expect equity markets to remain volatile in the near term.
Meanwhile, long-term investors should not worry about short-term volatility and go long on quality stocks. Meanwhile, here are my three top TSX picks you can buy this year.
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Nuvei
Nuvei (TSX: NVEI) is one of the top stocks to have in your portfolio due to its solid financials and healthy growth prospects. In the first three quarters, the company’s revenue grew 39% while its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) increased by 19%. Along with organic growth, its strategic acquisitions drove its financials. It processed around $141.2 billion of transactions during the first nine months, representing a 62% increase from the previous year.
Meanwhile, the global fintech company is developing innovative products, forming new partnerships, and expanding its APM (alternative payment methods) portfolio, which could boost its market share and drive financials. It recently partnered with Microsoft to expand its payment technology to the Middle East and Africa. Amid these growth initiatives, the company expects its topline to grow at 15-20% annually in the medium term. Also, the company’s management is confident of increasing its adjusted EBITDA margin to over 50% in the long run.
Despite its healthy growth prospects, Nuvei trades at an attractive NTM (next 12-month) price-to-earnings multiple of 11.9, making it an excellent buy.
Pizza Pizza Royalty
Given its stable cash flows and high dividend yield, Pizza Pizza Royalty (TSX: PZA) is an excellent monthly-paying dividend stock to have in your portfolio. It has adopted a highly franchised business model and collects royalties from its franchisees based on their sales. So, its financials are less susceptible to rising commodity prices and wage inflation. The company has continued to witness solid sales this year, with its same-store sales growing at 9.8%. Excellent value messaging, promotional activities, and innovative product launches boosted its same-store sales.
Supported by its solid same-store sales and the opening of new restaurants, the company’s royalty pool sales grew by 11.6%. These strong financials have allowed the company to raise its monthly dividend three times this year. With a monthly dividend of $0.0775/share, its forward yield currently stands at 6.39%. Meanwhile, its restaurant expansion and renovation plans and solid same-store sales could continue to boost its financials in the coming quarters, thus making it an excellent buy.
Telus
Telus (TSX: T), a defensive telecommunication company, is my final pick. The telecom sector was under pressure last year, as investors were worried about rising interest rates. Given the sector’s capital-intensive nature, investors were concerned that rising interest rates could increase the interest expenses of telecom companies, thus hurting their margins. The selloff has dragged Telus’s valuation down, with its NTM price-to-sales multiple falling to 1.7.
Meanwhile, the Federal Reserve could slash its benchmark interest rates this year, thus providing some relief for the sector. Telus is expanding its 5G and broadband reach to grow its customer base and drive its financials. Further, given its growth strategy, the company hopes its health services business will grow double digits over the long term. Also, its Agriculture and Consumer Goods segment offers excellent growth prospects. Considering its solid underlying business and exposure to high-growth segments, Telus would be an ideal addition to your portfolio this year.
