Here are some top Canadian stocks for beginner investors to consider start investing in. Most of these ideas provide solid dividend income that pay investors to wait for price appreciation.
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TD Bank
Toronto-Dominion Bank (TSX:TD) stock has traded at similar levels for several years. This sideways action provides a good entry point for long-term investing. The large North American bank makes resilient earnings that have been growing in the long run.
For example, in the past 10 fiscal years, the bank more than doubled its adjusted earnings per share, resulting in a compound annual growth rate (CAGR) of 7.9%. In this period, it had also more than doubled its dividend, equating to a growth rate of 9% per year.
Because the stock has gone sideways, it now offers a compelling dividend yield of almost 5.4%, which is at the high end of its historical yield range, as shown in the graph below.
TD Dividend Yield data by YCharts
Fortis
Fortis (TSX:FTS) is another blue chip stock that pays out reliable dividends. FTS stock has paid an increasing dividend for half a century!
The utility company’s operations are diversified across 10 regulated utilities in Canada, the United States, and the Caribbean. Primarily, it consists of distribution and transmission assets that provide essential services no matter how the economy is doing.
The dividend stock has also traded sideways for some time. Currently, it offers a fairly decent dividend yield of almost 4.5%. At $53 per share at writing, it trades at a price-to-earnings ratio (P/E) of about 17, which is a discount of over 10% from its long-term normal valuation, as the utility tends to trade at a premium valuation for its predictability and resilience.
Canadian Pacific Kansas City
With a position in Canadian Pacific Kansas City (TSX:CP), beginners won’t be targeting dividends because it is more of a growth stock. However, the transnational railway could benefit from cyclical trends. In other words, its earnings could be sensitive to the ups and downs of the economic cycle. For example, in a recession, it could see a drop in its earnings, but it should also benefit from an economic expansion.
Currently, CP stock’s dividend yield is about 0.7%. However, the railroad stock could provide strong gains boosted by a double-digit earnings growth rate over the next few years, which could lead to similar stock price appreciation.
To be sure, analysts think the stock trades at a discount of over 10% at under $108 per share.
Manulife
Year to date, Manulife (TSX:MFC) stock has rallied high, rising 23%. This is a classic example of the market bidding up an undervalued stock. The catalyst was the company shedding some legacy assets that were dragging down its performance.
At about $36 per share, the life and health insurance stock remains reasonably valued at a P/E of about 10 and an expected earnings growth rate of about 7%. Manulife pays a growing dividend, which rose 180% over the past 10 years, equating to a CAGR of almost 10.9%! Over the next few years, it has the potential of delivering total returns of about 10 to 13% per year, while raising its dividend.
Brookfield Asset Management
Brookfield Asset Management (TSX:BAM) has a short trading history versus the other ideas introduced. However, be assured that it’s a solid business that was spun off from its parent company, which allows the business to have greater flexibility for growth.
There’s an increasing demand for investing in global alternative assets, particularly ones that generate substantial cash flows, which are the bulk of Brookfield Asset Management’s investments, including renewable power and transition, infrastructure, private equity, real estate, and credit. It has a long-term track record of delivering double-digit total returns. This performance entices investors to come back for more.
At the recent price of about $52, it is not a bad time to buy some shares in BAM as it offers a dividend yield of roughly 4%. Management thinks it could possibly increase its dividend at a double-digit rate.
