As the first month of 2024 comes to an end, investors are looking for stocks to invest their surplus cash and earn decent returns. According to analysts, there are a few stocks that may not see an immediate rally. However, these stocks do hold strong potential for decent returns in the future.
Here are my three top picks for TSX stocks that could be poised for a nice rally in 2024 and beyond. Each of these companies provides considerable value as a dividend stock but also has unique value and growth catalysts worth considering.
Killam Apartment REIT
Headquartered in Nova Scotia, Killam Apartment REIT (TSX: KMP.UN) is among Canada’s largest residential real estate investment trusts, or REITs.
This company primarily has three priorities to fulfill. These are portfolio diversification geographically through acquisition measures, increasing earnings from its existing earnings, and introducing high-quality properties in the core market.
The company’s total shareholders return, a key metric in this sector, has certainly been impressive. Over the past five years, Killam has delivered 54% to investors, suggesting this REIT is doing what it was created to do: return cash flow to passive real estate investors.
Now, the stock has traded roughly flat over the past year and five-year periods. This suggests that Killam’s stock price may be detached from its fundamentals. And at a price-to-earnings ratio of only 8.6 times, there’s an obvious case that can be made that investors are growing too bearish on this name. As the saying goes, it’s best to buy when there’s blood in the streets. In the REIT sector, this appears to be the case, and Killam remains one of my top picks in this peer group.
Enbridge
Enbridge (TSX: ENB), along with its subsidiaries, operates as an energy infrastructure company. This firm operates five departments, including gas transmission and midstream, gas distribution and storage, energy services, renewable power generation, and liquid pipelines.
Enbridge has been a favourite stock among investors looking for dividend income for a very long time. Indeed, with a current dividend yield of 7.6%, investors are handsomely rewarded for owning shares, given the company doesn’t cut its distribution moving forward.
Finding stocks that provide yield in excess of the long bond is a difficult task. However, Enbridge’s status as a long-term dividend stock is unparalleled. The company has been paying regular dividends for decades, increasing its distributions by around 10%, on average, every year.
Now, that rate of dividend growth is likely to slow, as the company focuses on paying down debt and stabilizing its balance sheet. Thus, the market appears to be pricing this into Enbridge’s valuation. However, at these current multiples, Enbridge certainly looks like a great way for long-term investors to play the on-shoring trends when it comes to domestic energy production and transportation within North America.
Suncor Energy
Suncor Energy (TSX: SU) is an integrated energy company that operates in Canada and other parts of the world. The company is involved in the production of synthetic crude, crude oil, and natural gas, petroleum refining, and oil exploration.
The company’s financial results over the past three years have been robust. Accordingly, this energy producer’s stock price has followed suit, buoyed by strong commodity prices following the pandemic.
Now, central banks are aggressively aiming to bring inflation down. A big component of inflation is energy costs, as these bleed into the prices of most goods in the economy. Accordingly, the market appears to be discounting Suncor’s current cash flow metrics, with this stock trading at what I can only call very attractive levels.
Suncor’s earnings per share grew at a double-digit clip once again this past quarter, and while we have seen some strength with Suncor’s stock price, the capital appreciation investors have seen really doesn’t match the underlying fundamentals. So, for those bullish on a potential bull market in the energy sector continuing for the coming years, Suncor remains a top pick to consider right now.
