Equity markets can deliver superior returns but also can be risky. So, if you are new to investing, you should be careful and look for companies with stable businesses that generate healthy cash flows. The following three under-$50 Canadian stocks would be ideal for new investors, given their excellent track record and healthy growth prospects.
Enbridge
Enbridge (TSX:ENB) operates a pipeline network transporting oil and natural gas across North America. Besides, the company has a solid presence in renewable energy and the low-risk utility space. The company’s long-term take-or-pay and cost-to-service contracts shield its financials from market fluctuations, thus generating stable financials. Supported by these stable financials, the company has delivered a total average shareholder return of 12% since 2004, outperforming the broader equity markets. ENB stock has also raised dividends for the previous 29 years at a CAGR (compound annual growth rate) of 10% and offers a healthy forward dividend yield of 7.5%.
Meanwhile, Enbridge has planned to invest around $6-7 billion annually until 2026, expanding its midstream, renewable, and utility asset base. Besides, the company has acquired two natural gas utility assets from Dominion Energy and is working on acquiring the third facility. Further, the company’s balance sheet looks healthy, with its net debt-to-EBITDA at 4.7. ENB trades at an attractive price-to-book multiple of 1.8, making it a good buy for beginners.
Hydro One
Hydro One (TSX:H) transmits and distributes electricity to 1.5 million customers across Ontario. The company operates a highly regulated business, with around 99% of its revenue generated from regulated assets. So, its financials are less susceptible to market volatility, thus generating stable and predictable cash flows. Besides, the company is focused on improving its efficiency and lowering its expenses. In 2023, it generated $113.1 million of productivity savings, with $62.4 million from operations, maintenance, and administrative costs and $51.5 million in capital.
Meanwhile, Hydro One plans to invest around $11.1 billion from 2024 to 2027, which could boost its rate base at an annualized rate of 6.2%. The rate base expansion and improving operating efficiencies could drive its EPS, with the management projecting its EPS to grow at a 5-7% CAGR through 2027. Amid the expansion of EPS, management is confident of raising its dividends by 6% annually in the coming years. Given its low-risk business and healthy growth prospects, I believe Hydro One is ideal for new investors.
BCE
Although the telecommunication sector is under pressure, I have chosen BCE (TSX:BCE) as my final pick. Due to unfavourable regulatory policies and a high interest-rate environment, the company has lost 29% of its stock value compared to its 52-week high. Given the steep decline, the downside is limited. Besides, digitization and growth in remote working and learning have increased the demand for telecommunication services, while high initial investments and regulatory approvals have created barriers for new entrants.
Meanwhile, BCE is geographically expanding its 5G and 5G+ services, which could continue to expand its customer base and drive its financials. The company has also undertaken several initiatives to cut costs and improve operating efficiency. The telco currently pays a quarterly dividend of $0.9975/share, with its forward yield at 9.3%. Also, the recent sell-off has dragged its NTM (next 12 months) price-to-sales multiple down to 1.6, making it an enticing buy at these levels.
