With the second half of the year now well underway, there is plenty of anticipation for what’s to come, especially with interest rates now on the decline in Canada and soon to be reduced south of the border. Higher interest rates have weighed on stocks across various sectors in recent years, meaning a lowering of rates is creating a major opportunity for top Canadian stocks to see a significant rally to finish 2024.
However, the reason interest rates are now declining is that both the economy and inflation have been cooling off. So, while lower interest rates will be positive for many businesses, the cooling economic environment is another risk that investors need to be aware of.
That’s why some of the top stocks to buy for the second half of 2024 are safe and reliable businesses that can not only benefit from lower interest rates but can also weather the storm of a worsening economy, especially if we don’t get the soft landing that policymakers are hoping for.
So, if you’ve got cash on the sidelines that you’re looking to put to work today, here are three top Canadian stocks to buy today.
A top utility stock to buy for the second half of 2024
If you’re looking to add stocks to your portfolio that can benefit from lower interest rates yet remain stable should the economy continue to worsen, a high-quality utility like Fortis (TSX: FTS) is one of the best to buy now.
As a top dividend stock and a company that uses plenty of debt to leverage its operations, Fortis can benefit significantly as interest rates decline.
First off, as yields fall Fortis’ stock should see a bit of a rally, as its dividend yield will also begin to fall as a result, sending its share price higher. Furthermore, lower interest rates means it will cost less to service its debt in the coming years, which would boost its profitability.
Plus, as a utility stock, Fortis is one of the safest and most recession-resistant businesses that hardly ever sees an impact on operations during economic slowdowns due to the essential services it provides.
Therefore, while Fortis still trades off its all-time high and offers a dividend yield of 4%, it’s certainly one of the top stocks to buy now for the second half of 2024 and beyond.
Two top infrastructure stocks
In addition to Fortis, both Brookfield Infrastructure Partners (TSX: BIP.UN) and Enbridge (TSX: ENB) are two more top stocks to consider buying now for many of the same reasons as Fortis.
Both Brookfield and Enbridge provide essential services and have highly diversified operations, which mitigates risk and makes them ideal stocks to hold through an economic slowdown.
Brookfield’s global portfolio of assets, such as telecom towers, ports, railroads utilities and more, ensures a steady flow of cash flow each quarter. Meanwhile, Enbridge’s operations are essential for the North American economy.
In addition, each of these stocks also uses billions of dollars of debt to help leverage their operations, and both of these stocks also pay significant dividends. So as interest rates decline, both Enbridge and Brookfield could start to see a sustained rally.
For example, from 2021 to 2023, Enbridge’s interest expense jumped from just shy of $2.7 billion to more than $3.8 billion. Similarly, Brookfield’s interest expense jumped from just shy of $1.5 billion in 2021 to more than $2.5 billion in 2023, an increase of more than 70% in just two years.
Therefore, as rates decline and these companies’ interest expenses decline, their profitability should see a meaningful improvement.
Furthermore, as rates decline, sending yields lower, both stocks could see a significant uptick in their share prices in the months ahead.
So, while you can buy Enbridge while it’s still relatively cheap and offers a yield of more than 6.8%, and while Brookfield Infrastructure offers a yield of more than 5.4%, these two dividend growth stocks are some of the top investments, not just to consider now for the second half of 2024, but also to hold for years to come.
