Amid signs of easing inflation, interest rate cuts, and better-than-expected June retail sales in the United States, the Canadian equity markets have bounced back strongly this month, with the S&P/TSX Composite Index rising 8.7%. However, the Bank of Canada has slashed its 2024 growth projections from 1.5% to 1.2% as people spent more on servicing their debt than buying discretionary items. Besides, the concerns over global growth amid a prolonged high interest rate environment still persist.
Given the uncertain environment, investors should look for a balanced portfolio with growth, defensive, and dividend stocks. Here are my three picks.
goeasy
goeasy (TSX:GSY) is one of the top growth stocks to have in your portfolio due to its consistent performance over years and healthy growth potential. Over the last 10 years, the company has grown its revenue and adjusted EPS (earnings per share) at an annualized rate of 19% and 28.6%, respectively. Continuing its uptrend, the subprime lender posted record loan originations in the first quarter of this year, expanding its loan portfolio to $3.9 billion. Amid the expansion of its loan portfolio and stable credit and payment performances, the company’s top line and adjusted EPS grew by 24%.
Further, the central bank has slashed its benchmark interest rates twice this year, while investors are hoping for one more cut this year. Falling interest rates could boost economic activities, thus driving the demand for credit and expanding goeasy’s addressable market. Further, the company is expanding its product offerings, adding new distribution channels, venturing into new markets, and strengthening its balance sheet by raising additional funds to support its organic growth. Also, it has enhanced income verification processes, tightened its credit tolerance levels, and adopted next-gen credit models, which could reduce its risks and drive profitability.
Moreover, goeasy has been raising its dividends at an annualized rate of 30% for the last 10 years while its forward yield is 2.3%. Besides, GSY trades at 11.2 times analysts’ projected earnings for the next four quarters, making it an excellent buy.
Waste Connections
Second on my list would be Waste Connections (TSX:WCN), which collects and transfers non-hazardous solid wastes in secondary and exclusive markets in the United States and Canada. Last week, the company posted an excellent second-quarter performance, with its revenue and adjusted EPS growing by 11.2% and 21.6%, respectively. Price-led organic growth, contributions from acquisitions over the last four quarters, and higher commodity values drove its top line. Besides, its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) margin expanded by 150 basis points to 32.6%.
Meanwhile, WCN’s management expects the momentum to continue in the second half and has also raised its 2024 guidance. Now, the management projects its 2024 revenue to come in at $8.9 billion, representing a 10.3% increase from its previous year. Besides, its adjusted EBITDA could increase by 13.4% to $2.9 billion. The company is also constructing several renewable gas facilities, which could support its financial growth in the coming years.
Enbridge
Enbridge (TSX:ENB) is one of the top dividend stocks to have in your portfolio due to its contracted business, consistent dividend growth, and high dividend yield. The midstream energy company has signed long-term cost-of-service or take-or-pay contracts to transport oil and natural gas across the United States and Canada, which shields its financials from commodity price fluctuations. Further, around 80% of its EBITDA is inflation-indexed, protecting against rising prices.
Further, the company continues with organic growth and strategic acquisitions to drive its financials. It is progressing with its $25 billion secured growth program by investing around $6-$7 billion annually. The expansion of its asset base could boost its financials. Besides, its financial position also looks healthy, with liquidity of $12.9 billion as of March 31. So, I believe Enbridge is well-equipped to continue with its dividend growth. ENB stock offers an attractive dividend yield of 7.2% and trades at an attractive NTM price-to-earnings multiple of 17.1, making it a compelling buy at these levels.
