Safe and Sound Stocks for Canadians: My Top 5 Choices

Five safe stocks to buy on a market pullback.

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Are you looking for safe and sound TSX stocks to park money that you don’t need for a long time? Here are my top choices in no particular order. Personally, I’d consider buying them on market pullbacks and could pretty much forget that I hold them and come back years later and expect my wealth to grow meaningfully. Most of these names also pay out nice dividends.

RBC stock

Royal Bank of Canada (TSX:RY) is the banking leader in Canada. It is the steady-eddy kind of stock conservative investors like. RBC recently acquired HSBC’s Canadian operations, which should allow it to gain some incremental share in the Canadian market. However, there are also risks involved, including client retention risk and regulatory risk, as well as the potential for overpaying for the acquisition. Furthermore, mergers have integration costs.

Royal Bank stock’s 10-year dividend growth rate is 7.8%. At $142.87 per share, RBC stock offers a dividend yield of close to 4%. The stock appears to be fairly valued. So, it would be smart of investors to wait for a meaningful market correction to load up on shares.

Manulife stock

Another financial services stock that trades at a reasonable multiple is Manulife (TSX:MFC) stock. The stock has been on a tear since late 2023 after consolidating in a sideways range between $23 and $25 for the year. Since late 2023, the stock is up about 38%, which is a hefty gain for a high-yield dividend stock.

At $34.50 per share, the stock trades at about 9.6 times its blended earnings. In the past five years, it increased its adjusted earnings per share by 4.8% per year. At the recent price, it offers a decent dividend yield of 4.6%.

Assuming it experiences no valuation expansion and a 5% earnings growth rate, combined with its dividend, the stock can deliver total returns of close to 10% per year over the next few years, which is not bad. If it corrects to below $30, it will be a nice buy-the-dip opportunity.

Fortis stock

As a Canadian Dividend Aristocrat that has increased its common stock dividend for half a century, Fortis (TSX:FTS) is an obvious option for safe and sound stocks. Its 15-year dividend growth rate is 5.7%. Going forward, it has a capital plan that helps support sustainable dividend growth of 4 to 6%, which aligns with this rate.

FTS stock’s last dividend hike was 4.4% in September, which is at the low end of the range, likely partly due to a higher cost of capital from higher interest rates. No matter what, investors can anticipate another dividend hike coming up in September. Analysts believe the stock is fairly valued today. So, for a better margin of safety, conservative investors can wait for a greater market correction.

Rogers Communications

Rogers Communications (TSX:RCI.B) stock hasn’t increased its dividend since 2019. However, its dividend yield of over 3.8% is not bad. This is because the stock price hasn’t gone anywhere for some time.

The general situation is this. Big Canadian telecom stocks, including Rogers Communications, have been weighed down by higher interest rates since 2022. More specifically, the stock has largely traded between $50 and $64 per share since late 2022.

At $51.93 per share at writing, the stock seems to be quite undervalued trading at about 11 times blended earnings. Normally, the stock can trade north of 15 times, which suggests a discount of over 26%. Indeed, analysts also think that the stock trades at a meaningful discount of over 26%.

Constellation Software

Constellation Software (TSX:CSU) is a tech stock that seems to defy gravity. Seldom does the market offer a buy-the-dip opportunity in the safe and sound stock. Therefore, it’s also hard to catch the stock on sale.

The tech stock multiplied investors’ money 15 times in the last decade and tripled it in the last five years. At $3,800 per share at writing, the stock trades at a forward price-to-earnings ratio of about 35 times, which analysts believe to be fair.

Surely, for its consistent delivery of value to shareholders, it could work in investors’ favour by dollar-cost averaging into the name via commission-free platforms like Wealthsimple that allow for partial-share buying.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Kay Ng has positions in Fortis, Rogers Communications, and Royal Bank of Canada. The Motley Fool recommends Constellation Software, Fortis, and Rogers Communications. The Motley Fool has a disclosure policy.

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