Capital Growth Plus Dividends: 3 Hidden Gems to Buy Now

These companies that may be relatively undiscovered by investors (particularly global investors) who are unfamiliar with the Canadian market.

| More on:
diamonds, hidden gems

Image source: Getty Images

Finding hidden gems in the stock market is easier said than done. Of course, the market is essentially considered to be a weighing mechanism, and the efficient market hypothesis says that pretty much all available information that’s out there is priced into stocks at any given moment in time.

Accordingly, finding diamonds in the rough can be more difficult than investors think. Having the foresight to see where the puck is headed over the long term and determine whether an individual stock is undervalued based on certain assumptions is key.

These three stocks certainly fit the profile (in my mind) of companies that may be relatively undiscovered by investors (particularly global investors) who are unfamiliar with the Canadian market.

Fortis

Fortis (TSX:FTS) is the owner and operator of 10 utility transmission and distribution assets in Canada and the United States. The company caters to approximately 3.4 million customers and possesses minority stakes in electricity generation with multiple Caribbean utilities. With strong recurring revenue streams generated from its regulated and non-regulated operations, this dividend stock (yielding around 3.9%) is worth considering due to its Dividend King status and its cash flow stability in this current environment.

Fortis is certainly one of the top utility stocks, and I think it is worth considering in this current market environment. Given the secular tailwinds this sector has (if artificial intelligence is really going to be as big as folks say it will, we’re going to need a lot more electricity moving forward), this is a stock that could be in its early innings of an impressive bull run.

Toronto-Dominion Bank

Toronto-Dominion Bank (TSX:TD) is a leading Canadian bank that’s well-known for having one of the most rock-solid balance sheets of global players. With a strong U.S. presence (TD actually has more retail branches in the U.S. than in Canada), the company provides diversified geographic exposure and remains one of my top picks in this sector for this reason.

The company’s stock price has certainly been volatile in recent years, but the trend thus far this year has been solid. Investors appear to be flocking back into Canadian banks, and it’s no surprise to me that TD is mopping up a lot of the capital that’s coming into this sector.

With an impressive focus on efficiency and profitability, TD remains a top dividend stock, which I think remains a hidden gem, particularly among its Canadian counterparts.

Restaurant Brands

Restaurant Brands (TSX:QSR) is one of the top hidden gem stocks in the market, at least in my view. The company derives its revenue from company-owned restaurants, royalty fees, and lease income from franchised stores worldwide. 

Restaurant Brands International is targeting an increase in store count from 31,070 in 2023 to 40,000 by 2028, with plans to add approximately 1,800 new restaurants annually. Furthermore, the company aims to remodel 600 of its recently acquired Carrols restaurants and accelerate the expansion of Firehouse Subs in the U.S. and Canada.

Its main focus for Popeyes includes extending its operating hours and implementing operational enhancements. The company plans to raise the number of Popeyes restaurants in the U.S. and Canada from 3,400 to 4,200 by 2028 while simultaneously improving its operational efficiency.

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 Chris MacDonald has positions in Restaurant Brands International. The Motley Fool recommends Fortis and Restaurant Brands International. The Motley Fool has a disclosure policy.

More on Investing

Path to retirement
Dividend Stocks

Dividend Fortunes: 2 Canadian Stocks Leading the Way to Retirement

Consider adding this growth stock and reliable Dividend Aristocrat to your self-directed portfolio to benefit your retirement plan.

Read more »

happy woman throws cash
Dividend Stocks

Opinion: The 3 Best Dividend Stocks in Canada Right Now

These best Canadian dividend stocks can help you earn steady passive income for decades.

Read more »

Silver coins fall into a piggy bank.
Investing

Invest $500 Monthly to Generate $10,000 in Retirement Income

Investors can earn around $10,000 monthly retirement income through a disciplined and consistent investment approach.

Read more »

Printing canadian dollar bills on a print machine
Tech Stocks

2 Lucrative SaaS Stocks to Own This September

Quality SaaS stocks such as Snowflake and Docebo are poised to deliver outsized gains to shareholders in 2024 and beyond.

Read more »

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.
Investing

2 TFSA Stocks to Buy Right Now With $7,000

The TFSA is an excellent vehicle for growing wealth, allowing you to harness the benefits of tax-free earnings by investing…

Read more »

Plane on runway, aircraft
Investing

Bombardier Just Might Be the 1 Best Stock to Buy Now

Bombardier (TSX:BBD.B) could be the best buy now given its steady performance and healthy returns in back-to-back years

Read more »

Technology
Dividend Stocks

Why Passive-Income Investing Isn’t Just About Dividends

Some stocks like Fortis Inc (TSX:FTS) pay dividends, but they don't have to.

Read more »

potted green plant grows up in arrow shape
Stocks for Beginners

2 Canadian Growth Stocks I’d Stash in a TFSA for the Long Haul

These two growth stocks aren't just climbing. They're taking off! And now is the time to jump on board.

Read more »