The primary aim of investing in asset classes such as equities is to generate inflation-beating returns over time. As the stock market is volatile in the near term, it’s essential to ensure you stay invested in this asset class for several years to benefit from the power of compounding.
Further, it’s crucial to identify a portfolio of stocks that can help you derive steady gains in the upcoming decade.
Here are two such TSX stocks trading under $50 that new investors can consider buying today.
Brookfield Infrastructure Partners stock
Valued at a market cap of $17 billion, Brookfield Infrastructure Partners (TSX: BIP.UN) shares are priced at $37 at the time of writing. Brookfield Infrastructure owns and operates a diversified portfolio of cash-generating real assets such as utilities, pipelines, toll roads, terminals, data centres, railroads, and cell towers.
It continues to offload legacy assets to reinvest the proceeds in other growth markets, enabling the company to grow its FFO, or funds from operations, per unit by 10% annually. The company ended 2023 with FFO of US$2.3 billion, which suggests it is trading at just eight times the trailing FFO. While organic growth stood at 8%, volume growth across critical infrastructure networks and the commissioning of US$1 billion of new capital projects contributed to FFO growth as well.
In the last two quarters, BIP has commissioned US$2 billion of new investments, which should drive future FFO higher and support dividend hikes. Currently, BIP pays shareholders an annual dividend of $1.62 per share, translating to a forward yield of almost 6%. BIP expects to grow these distributions between 5% and 9% annually in the medium term.
Analysts, too, remain bullish on BIP stock and expect the stock to surge roughly 30% in the next 12 months. After adjusting for its dividend, total returns will be closer to 35%.
GFL Environmental stock
Valued at $16.5 billion by market cap, GFL Environmental (TSX: GFL) stock is priced at $43.8. GFL is the fourth largest diversified environmental services company in North America, providing a comprehensive line of solid waste management, liquid waste management, and soil remediation services in Canada and the U.S.
GFL’s adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) increased by 21.1% year over year after excluding the impact of divestitures. This solid EBITDA expansion showcases GFL’s operating leverage amid a challenging macro backdrop.
In 2023, the company divested three non-core solid waste businesses for $1.6 billion. It used $275 million from the divesture to invest in organic growth initiatives such as RNG (renewable natural gas) and new contract wins.
GFL’s EPR (extended producer responsibility) related investments are expected to generate between $80 million and $100 million of incremental EBITDA starting in the fourth quarter (Q4) of 2024. It also expects to achieve $175 million of adjusted EBITDA from RNG-related investments by 2026.
In 2023, GFL has deployed $900 million into 39 highly accretive acquisitions that generate $355 million in annual revenue. This year, it expects to deploy between $600 million and $650 million towards acquisitions.
Analysts expect GFL to increase sales by 7% to $8 billion and earnings growth at 19% in 2024. Bay Street expects GFL stock to surge by 20% in the next 12 months.
