The best way to gain exposure to equity markets is to invest in low-cost passive funds that track indices such as the S&P 500. In the last six decades, the S&P 500 index has returned more than 10% annually after adjusting for dividend reinvestments. So, it makes sense for investors to hold at least 80% of their equity portfolio in these index funds. However, investing in individual stocks can help you beat the market and generate outsized gains. Here are four top TSX stocks to buy right now if you want to beat the broader markets over time.
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Shopify stock
Among the fastest-growing TSX companies, Shopify (TSX: SHOP) has already returned 2,680% to shareholders since its IPO (initial public offering) in 2015. Despite these monstrous gains, shares of the e-commerce giant trade 60% below all-time highs, allowing you to buy the dip.
Investors are worried about Shopify’s deceleration in sales amid a challenging macro environment. However, the tech company is forecast to increase sales by 21% to US$8.54 billion in 2024 and by 20% to US$10.3 billion in 2025. Moreover, its adjusted earnings per share is forecast to rise to US$6 by 2028. So, if SHOP stock is priced at 30 times forward earnings, your investment might almost triple in the next four years.
Enbridge stock
A TSX giant that offers you a tasty dividend yield of more than 7%, Enbridge (TSX: ENB) is a diversified energy infrastructure company. Despite the cyclicality surrounding energy stocks, Enbridge has raised its dividends by 10% annually on average since 1995. Moreover, it aims to maintain a dividend-payout ratio of less than 70%, providing it with the flexibility to reinvest in growth projects, lower balance sheet debt, and target accretive acquisitions, all of which should drive future cash flows and dividends higher.
Enbridge continues to remain a top TSX stock in June 2024 and should help you deliver steady returns in the upcoming decade.
Brookfield Renewable Partners stock
Another TSX stock with an attractive yield is Brookfield Renewable Partners (TSX: BEP.UN). The clean energy heavyweight owns several clean energy assets in verticals such as hydro, solar, and wind. In the first quarter (Q1) of 2024, Brookfield increased sales by 12% year over year to US$1.49 billion, US$60 million higher than consensus estimates. Its funds from operations of US$0.45 per share rose 8% and beat estimates of US$0.42 per share.
Despite a sluggish global economy, Brookfield Renewable aims to increase its FFO per share by 10% in 2024. In the medium term, it targets growing dividends between 5% and 9% annually.
GFL Environmental stock
The final TSX stock on my list is GFL Environmental (TSX: GFL) a company part of a recession-resistant sector. Valued at $19 billion by market cap, GFL Environmental transports, manages, and recycles solid and liquid waste while providing soil-remediation services.
GFL continues to deploy growth capital across various initiatives that should generate significant returns on invested capital going forward. In Q1 of 2024, it allocated US$62 million to incremental growth investments related to recycling and RNG (renewable natural gas) infrastructure.
It aims to deploy between US$250 million and US$300 million into these investments in 2024, enabling GFL to increase adjusted earnings before interest, tax, depreciation, and amortization between US$80 million and US$100 million annually.
