When it comes to picking stocks on the broad TSX Index, it can pay dividends to insist on lower-cost stocks that may be skewed toward the undervalued side. Indeed, less-loved stocks flying under the radar of others could really help you gain a leg up over the averages.
Of course, you need to ensure that a discount attached to a stock is unwarranted. Some of the time, you could be looking at a value trap, which is a stock that rightfully deserves to be cheaper relative to rivals due to certain shortcomings, either industry-related or company-specific.
In any case, beginner investors should insist on sticking with cheap stocks that aren’t at risk of seeing their economic moats wither away. After a moat is eroded, economic profits could be at risk of being snagged by industry rivals, new and old.
In this piece, we’ll look at two stocks in shining armour that I think have intact moats and modest admission prices as we look to conclude the first month of 2024.
Telus
Telus (TSX: T) is a telecom company that’s in the process of recovering from a steep dip of 2022 all-time highs. Indeed, I was quite wary of Telus stock when it went parabolic in the early part of 2022. The euphoric surge in the Canadian telecom did not end well. For those who bought the peak, it ended in tears as shares slid into a nasty bear market. Today, the stock (hopefully) has bottomed out and could be headed for gains as interest rates retreat and the economic reality proves not as hideous as expected.
In any case, the long-term fundamentals of the Canadian telecom scene still look incredibly lucrative. At writing, investors are getting a 6.11% dividend yield from shares of T. That’s a nice payout and one that could be quick to grow once Telus returns to the fast track.
Of the big telecoms, Telus stands out as one of the best of the batch. It’s the perfect mix of growth and income. Better yet, it lacks a media division, which is a huge positive given secular trends working against legacy media.
Telus is a knight in shining armour with a great mix of value and dividends! Passive-income investors, don’t look past the name for 2024!
National Bank of Canada
National Bank of Canada (TSX: NA) is a standout Canadian bank that may very well have what it takes to stand up to its much larger rivals. National Bank stock has been performing very well, even as shares of its peers stalled. Though National Bank is small, it’s delivered for investors, even amid industry-wide turbulence. Moving into 2024, I expect more outperformance, as the bank looks to make new highs while many of its peers are still in a multi-year slump.
When it comes to the banking scene, why not stick with the top performer that’s shown it can fare well when the going gets tough? With a 4.23% dividend yield and a 10.67 times trailing price-to-earnings ratio, you’re not getting the cheapest valuation metrics or the highest dividend. But what you are getting is a bank that may have an edge over peers as it continues to move forward in spite of industry headwinds.
Personally, I wouldn’t chase yields in the banking scene unless you need the passive income. Instead, a bank with proven resilience may be the better bet if total returns (capital gains and dividends) are what you seek.
