2 Stocks to Buy Right Now With Just $3,000

These dividend stocks are top choices for Canadian investors looking to create massive returns and passive income, even with $3,000.

Amy Legate-Wolfe

Author Bio

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Her work can also be found at Canada's National Observer, where she writes on the business side of climate action. Before joining Motley Fool Canada, Amy wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband.

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Favorite Investment Quote

“October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published August 19, 2024 7:00 pm EDT

So you don’t have a million dollars to invest. So what? Starting small with an investment of just $3,000 can still have a significant impact over time. This is due to the power of compounding.

For example, if you invest $3,000 in a diversified portfolio with an average annual return of 7%, and you continue to contribute an additional $100 per month, the investment could grow to over $100,000 in 25 years! So let’s see what stock could help get you started.

money cash dividends — Image source: Getty Images

Emera

If you’re a Canadian investor with $3,000 to invest, Emera (TSX: EMA) could be an excellent choice for your portfolio – especially if you’re looking for a stable, dividend-paying stock. Emera is a major player in the utilities sector, providing energy services across Canada, the U.S., and the Caribbean. With a market cap of $14.1 billion, this company has a solid foundation. And its low beta of 0.34 suggests that it’s less volatile than the overall market – perfect for those seeking a more conservative investment.

One of the main attractions of Emera is its strong dividend yield, currently sitting at an impressive 5.9%. With a forward annual dividend rate of $2.87, your $3,000 investment could generate a steady stream of income. This is ideal for anyone looking to enhance their passive income. The payout ratio is on the higher side at 110.6%. This means the company is paying out more than it earns. Yet Emera’s history of consistent dividend payments makes it a reliable option for income-focused investors.

Emera’s recent earnings also highlight its potential. The company reported quarterly earnings growth of a whopping 234.1% year-over-year, with diluted earnings per share (EPS) of $2.57. This shows that Emera has been performing well, despite challenges in the broader market. The company generated $7.4 billion in revenue over the last year. This is a 14% increase year-over-year, indicating strong operational performance and the ability to navigate economic uncertainties.

From a valuation perspective, Emera’s Price/Earnings (P/E) ratio of 21.9 might seem a bit high. But when you consider the company’s steady cash flow and defensive nature, it’s clear why investors are willing to pay a premium. The stock is trading at a Price/Book (P/B) ratio of 1.3, suggesting that it’s valued reasonably relative to its assets. With the stock currently trading around $49.08, this could be a good entry point, especially considering its 52-week range of $43.67 to $52.31.

Transcontinental

If you’re a Canadian investor with $3,000 to invest, Transcontinental (TSX: TCL.A) is a stock worth considering, especially if you’re looking for a combination of income and potential growth. Currently trading around $16, Transcontinental offers a solid dividend yield of 5.7%. This makes it an attractive option for those looking to generate passive income. With a forward annual dividend rate of $0.90, your $3,000 investment could yield a nice income while you hold onto the stock.

Transcontinental has a market cap of $1.4 billion and is valued quite reasonably with a trailing P/E ratio of 15 and a forward P/E of just 6.4. This suggests that the stock might be undervalued compared to its future earnings potential. The company’s P/B ratio of 0.7 also indicates that the stock is trading below its book value. This could be a signal that it’s a bargain at its current price.

In terms of recent performance, Transcontinental reported a slight decline in quarterly revenue, down 8.6% year-over-year. This happened with a quarterly earnings decline of 28.4%. However, the company still managed to achieve a net income of $92.4 million, and earnings before interest, taxes, depreciation and amortization (EBTIDA) of $407.9 million over the last year. Despite these challenges, Transcontinental’s strong cash flow included operating cash flow at $485.7 million and levered free cash flow at $312.9 million. This indicates that the company is financially robust and capable of weathering economic uncertainties.

Given its solid dividend, attractive valuation metrics, and strong cash flow, Transcontinental offers a compelling opportunity, especially for Canadian investors looking to make the most of a $3,000 investment. Whether you’re focused on generating income or looking for long-term value, this stock could provide both, making it a versatile addition to your portfolio.