Here are three no-brainer stocks I would consider buying today, as they trade at good valuations and offer nice income that can be used for reinvestment or paying the bills.
TD stock
One key factor to help get good returns from stock investing is to not overpay for stocks. For example, Toronto-Dominion Bank (TSX:TD) stock has underperformed its big Canadian bank peers as a whole over the last one-, three-, and five-year periods. The Canadian bank stock now appears to trade at a reasonable price-to-earnings ratio of 10.2.
This offers a discount of about 13% from its long-term normal valuation. Even assuming no valuation expansion and conservative earnings-per-share growth of 5% per year, we can approximate total returns of about 10% per year when combining its dividend yield of 5%.
The bank actually increased its adjusted earnings per share by almost 8% per year over the last 10 fiscal years. If it increased its earnings per share by 7% per year instead of 5%, we can approximate long-term total returns of about 12% per year.
Given TD stock’s strong balance sheet, capital position, execution history, dividend track record, and good valuation, it is a no-brainer buy for low-risk investors seeking a blue-chip stock.
Manulife stock
Investors who are looking for more value might find Manulife (TSX:MFC) stock to be a no-brainer buy. After months of hard work, Manulife announced a transaction in December to reinsure four blocks of low return on equity business, including $6 billion of long-term care reserves to Global Atlantic. This deal essentially releases $1.2 billion of capital, which the company plans to return value to shareholders via share buybacks, which should help boost earnings due to a lower share count.
The life and health insurance stock only trades at a price-to-earnings ratio of about 8.4 at $28.62 per share at writing. So, it’s a good time for stock buybacks. At this low multiple, it also offers a dividend yield of 5.1%.
It is estimated to grow its earnings per share by about 7% per year over the next couple of years. If this growth rate played out, even if it did not experience any valuation expansion, it could still deliver total returns of about 12% per year!
Exchange Income
Exchange Income (TSX:EIF) may be the cheapest stock of this bunch. At least, analysts think so. Analysts have a consensus 12-month price target of about $63 on the stock, which represents a meaningful discount of approximately 26%. This makes the industrial stock an interesting candidate for total returns and income. In fact, Exchange Income offers a monthly dividend, which some investors prefer over the more common quarterly dividends.
To be sure, Exchange Income’s dividend yield of almost 5.7% is attractive compared to the Canadian stock market’s yield of about 3.2%. Although the business is subject to economic cycles, it has a proven track record of maintaining its dividends, which increase over time. For your reference, its 10-year dividend-growth rate is 4.2%, while its last dividend hike was 4.8% in November.
