New investors are wise to invest in a diverse mix of Canadian stock sectors and market segments. Over time in the market, you will start to discover your style and level of risk tolerance.
You can slowly adapt your portfolio to your preferences and financial goals. However, that is not always easy to know until you start.
If you are just looking for a place to start, here is a diversified five-stock portfolio to get you on your journey.
Dividend stocks
Many new investors like to get started in dividend stocks because they can earn a tangible cash dividend return. The key with dividend stocks is to not focus on just the yield. Rather, look for stocks that steadily growth their cash flows and dividend in tandem.
One stock that does this well is Canadian Natural Resources (TSX: CNQ). I wouldn’t normally recommend an energy stock for new investors. However, this company is just so good that it can’t be missed.
Canadian Natural is the largest energy producer in Canada. It has an excellent operating formula that generates a significant amount of cash.
Canadian Natural has grown its dividend by a +20% compounded annual rate for +20 years. It just hit its $10 billion debt target. It now plans to return 100% of its excess cash flow back to shareholders (through share buybacks and dividends). This stock yields 3.8% today, but growing dividends are likely ahead.
Granite Real Estate Investment Trust (TSX: GRT.UN) is a stable anchor for any portfolio. It operates one of Canada’s largest portfolios of high-quality industrial and logistic properties.
These properties are almost infrastructure-like assets. They have long lease terms (over six years), high-end tenants, and inflation-indexed rental rate growth.
Granite has a top-class management team, a low-levered balance sheet, and a history of consecutively increasing its dividend. It yields 4.4% today and trades a discount to its private market value (which means it’s at an attractive value today).
Value stock
Alimentation Couche-Tard (TSX: ATD) is widely known for its Circle K, Couche-Tard, and Ingo convenience store brands around the globe. This stock has delivered +18% compounded annualized returns over the past 10 years. That is a 424% total return.
The stock pulled back recently due to a weaker-than-expected quarter. Its challenges appear to be temporary.
The company still has considerable opportunity to grow by acquiring other convenience store businesses. If you want to learn more about this business, just step into one of its stores and see how it reigns above the competition.
A top Canadian compounder
Like ATD, WSP Global (TSX: WSP) has delivered very strong returns in the past. Its stock has returned 720% over the past 10 years. There is good reason to believe returns will be good going forward. It has is leading advisory, consulting, engineering, and design firm around the globe.
The company has consolidated a very fragmented industry. It continues to see good deal flow. Yet, it is also growing organically as demand for infrastructure around the world rises. This is not the cheapest stock, but it is a good buy on any reasonable pullback.
A small-cap growth story
Propel Holdings (TSX: PRL) is a bit of a riskier stock. However, the risk could pay off. It only has a market cap of $535 million. The company provides loans for the non-prime consumers in the U.S. (although it did just launch a platform in Canada).
This is a risky segment, but it uses proprietary artificial intelligence technology to profitably underwrite loans. It has a low-cost operating model because it works through banks and by lending its platform to other financial providers.
It is growing earnings per share by +25% a year! Yet, this is a volatile stock. It is still proving out its business model, so size your position accordingly.
