It’s impossible to know which stocks will have a good run over the next few years. Investors can increase their chances of success by spreading their risk across different companies in different industries. Building a diversified portfolio could allow you to get decent long-term returns no matter what comes in the way of the economy or the markets.
Investors who have a spare $1,000 to invest could explore the following top TSX stocks.
CP Rail stock
Investors looking for a growth stock can investigate Canadian Pacific Kansas City (TSX: CP), which is a marriage of Canadian Pacific and Kansas City Southern. It provides investors access to a single-line railway that connects Canada, the United States, and Mexico. So, the transcontinental railway has unique growth opportunities and should drive meaningful synergies from the merger.
In the last decade, CP stock almost tripled investors’ money. Today, the stock isn’t exactly cheap trading at about $106 per share, which implies a blended price-to-earnings ratio (P/E) of approximately 26.3 or a forward P/E of about 24.7. However, CP does have the potential to deliver earnings-per-share growth of over 12% per year over the next few years.
The stock is experiencing a pullback, and it’s down almost 14% from its 52-week high. At current levels, analysts believe the railroad stock trades at a discount of 16%, which is not bad to start investing in the top industrial stock.
TD stock
Bad news revolving around its anti-money laundering practices that could result in regulators imposing a hefty penalty on Toronto-Dominion Bank (TSX: TD) has weighed on the dividend stock. This could be a good opportunity for long-term investors to lock in a relatively high yield in the blue chip stock. The big bank isn’t going away, and it has a solid position in Canada and the United States with a focus on retail banking.
In the first half of the fiscal year, TD Bank witnessed adjusted revenue growth of 7.8% to $27.7 billion, although adjusted non-interest expenses climbed 11% to $12.2 billion. The bank reported loan loss provisions of $2.1 billion (up from $1.3 billion in the first half of fiscal 2023). Ultimately, the adjusted earnings per share for the period came in at $4.04, 2.4% lower year over year. Notably, its net impaired loans as a percentage of net loans and acceptances remained low at 0.29% (versus 0.25% for fiscal 2023).
TD Dividend Yield data by YCharts
At $76.45 per share at writing, TD stock trades at a blended P/E of about 9.6, which is a discount of about 18% from its long-term normal valuation. At this price, it also offers a juicy dividend yield of 5.3%, which is at the high end of its historical yield range, as shown in the YCharts above.
BAM stock
Brookfield Asset Management (TSX: BAM) is another dividend-paying financial services stock that could be a good buy on a pullback. The growth stock has just experienced a sell-off of 10% from its 52-week high.
The global alternative asset manager has more than US$925 billion of assets under management – about half of which are fee-bearing capital. The assets are diversified across renewable power and transition, infrastructure, private equity, real estate, and credit.
In its May investor presentation, BAM noted that it had almost US$100 billion of capital inflows over the past year and it’s “on track to hit its target of approximately US$1 trillion of fee-bearing capital in five years”. It will benefit from this growth, as its fee-related earnings are anticipated to grow at a double-digit rate.
At the recent price of $52.20 per share, analysts believe the 4% dividend stock is fairly valued. Notably, the stock has the potential to increase its dividend at a double-digit rate.
