The 4 Stocks That Beginning Canadian Investors Should Start Out With

New to investing and wondering how to start? Here’s a four- stock portfolio a Canadian can use to build wealth over the long term.

| More on:
A child pretends to blast off into space.

Source: Getty Images

If you are new to investing in stocks, it is wise to diversify your holdings between a mix of sectors, industries, and even geographies. As you gain experience, you will know which stock segments and strategies best fit your circumstance and disposition.

If you are looking for some ideas for a starter portfolio, here are four to begin with today.

A dividend growth stock as a portfolio foundation

It never hurts to have some exposure to dividend stocks. When the market is volatile, at least you collect an income return. If you can get some growth as well, it is even better. One stock that is ideal as a portfolio foundation is Canadian National Railway (TSX:CNR).

With a 2% dividend yield, it may not have a high yield. However, when it comes to dividend growth it has been spectacular. CNR has grown its dividend per share by a 13%-plus compounded annual rate for a decade.

Over long periods, CNR has proved a solid business. It has a diverse network, a strong competitive moat, and an excellent balance sheet. If the transnational railway can sustain high single-digit earnings per share growth, share buybacks and strong dividend growth are likely ahead.

A compounder in the making

If you want a steady grower that can provide geographic diversification, you might want to look at (TSXV:TOI). It was spun out from top-performing TSX stock Constellation Software, a couple of years ago.

Topicus is replicating Constellation’s software acquisition and consolidation strategy in Europe. The company also has an excellent development platform that is fuelling strong organic growth.

If Topicus can achieve even half the results as Constellation, its stock will be a resounding success. It has a great balance sheet, a smart management team, and a large market to consolidate. While it isn’t the cheapest stock, it has recently pulled back. If you can look out 5 to 10 years, now is a great time to add it.

An industrial with a great growth record

TFI International (TSX:TFII) does not operate an exciting business. It is a freight and logistics carrier across Canada and the United States. The company has been an excellent capital allocator.

It has acquired over 90 shipping and transport providers over the past 10 years. This has helped propel 23% compounded annual returns over the decade.

TFI stock has stalled due to challenging trends in the North America freight industry. These appear temporary. Likewise, there are plenty of self-help initiatives TFI is taking to improve service, reduce costs, and streamline its network.

In the meantime, the company is generating strong free cash flow. TFII stock has a great record of buying back stock and increasing its dividend. It should continue this into the future.

The small cap stock with rocket potential

Within a diversified portfolio, every investor should own a couple of stocks that may be higher risk, but also have skyrocket potential. Small-cap stocks are a great place to look for these. One stock that looks promising is Propel Holdings (TSX:PRL).

It provides small-sized consumer loans to the non-prime credit segment. While this is a riskier segment, Propel has a proprietary artificial intelligent underwriting platform. Not only can it underwrite quickly, but its model is highly predictive of a loan’s success.

Propel has been growing earnings per share by 30%-plus a year. It has several levers to continue this strong growth. PRL stock trades with a price-to-earnings ratio of only 13 and it has a yield of 2%.

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 Robin Brown has positions in Constellation Software, Propel, TFI International, and The Motley Fool has positions in and recommends Propel and The Motley Fool recommends Canadian National Railway and Constellation Software. The Motley Fool has a disclosure policy.

More on Stocks for Beginners

Dial moving from 4G to 5G
Dividend Stocks

This Undervalued Dividend Stock is Worth Buying Right Now

Want an undervalued dividend stock with long-term potential and a juicy yield? Here's an option you may regret not buying…

Read more »

Piggy bank next to a financial report
Stocks for Beginners

Is It Finally the Right Time to Buy Bank Stocks?

Canadian bank stocks are some of the most secure investments out there, but of them all, this bank stock is…

Read more »

Man data analyze
Tech Stocks

Is Shopify Stock’s Growth Sustainable?

There's a reason Shopify stock (TSX:SHOP) has been getting analyst upgrades, and investors should be paying attention.

Read more »

sale discount best price
Stocks for Beginners

2 Bargain Stocks You Can Buy Today and Hold Forever

When it comes to bargain stocks, investors want a solid mixture of current stability and future growth, and that's what…

Read more »

data analytics, chart and graph icons with female hands typing on laptop in background
Stocks for Beginners

Saputo Stock Rose 24% in 90 Days: Here’s Why It’s Still Undervalued

Saputo (TSX:SAP) stock is still on the rise, but that doesn't mean this stock isn't full of value.

Read more »

grow dividends
Top TSX Stocks

Enbridge Stock Pays a Massive 7 Percent Dividend and Now is a Great Time to Buy  

Have you considered buying Enbridge stock lately? If not, you may want to buy this long-term gem to start earning…

Read more »

Stocks for Beginners

Why Shares of Stelco Stock Surged 78% This Week

Stelco stock (TSX:STLC) surged this week on news from the company that it would be bought up. And there's still…

Read more »

grow money, wealth build
Dividend Stocks

How $250 per Month Can Create $193.20 in Annual Dividend Income

If you want a lot of dividend income, you want the right dividend stock. This one offers high monthly income…

Read more »