The Canadian equity market continues to perform well, with investors banking on higher-than-expected growth moving forward as interest rates fall. Indeed, it’s been a very interesting period of time that’s benefited investors, with most major stock indices reaching new all-time highs.
Of course, there are many who suggest these good times may be coming to an end, and there are certain recessionary red flags that shouldn’t be ignored. Accordingly, for investors looking to stay fully invested but want the best stocks to buy for growth and defensiveness, it’s important to focus on key quality factors moving forward. At least, that’s my view.
Here are two top TSX stocks to buy for investors looking to do just that.
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Restaurant Brands
Restaurant Brands (TSX:QSR) is a Canada-based quick-service restaurant operator with a global footprint and some of the most renowned brands in this space. From Canada’s favourite Tim Hortons to Burger King, Popeyes, and Firehouse Subs, Restaurant Brands’s portfolio of banners provides rather diverse exposure to this defensive sector.
The company’s focus has been on growing its footprint around the world, particularly in higher-growth emerging markets. This strategy has certainly caught on, with the company’s core banners seen as premium offerings in these markets and Restaurant Brands growing or maintaining share in most of its key regions.
Restaurant Brands continues to generate very steady revenue streams, with a business model based on royalty fees from its growing global restaurant base. As the company expands into new markets and consumers continue to trade down to more affordable options, this is a company with the potential to thrive in any macro environment. Despite this fact, QSR stock continues to trade at a discounted multiple to its historical average, currently around 17 times sales.
Over the long term, I expect Restaurant Brands to continue to be a winner. The company does have a high debt load, but that debt load should become more manageable with lower rates. Additionally, such factors should support the company’s global expansion initiatives over the long term.
Toronto-Dominion Bank
Toronto-Dominion Bank (TSX:TD) is among the largest Canadian banks, known as one of the “Big Five” in this key market. With personal and commercial banking operations as well as retail offerings in the U.S. and wealth management and insurance business around the world, TD is a diversified global financials player that continues to trade at a reasonable multiple.
That’s despite some rather strong stock price performance, as investors will note in the chart above. The company’s long-term capital-appreciation profile remains strong, as does its dividend. Currently yielding 4.7%, TD stock is among the top options for dividend investors seeking meaningful long-term capital appreciation upside, at least in my books.
That’s mainly due to the bank’s focus on efficiency and its ability to grow in the U.S. market. Often viewed as a Canadian bank due to its impressive footprint in the country, TD is actually among the larger players in the U.S. retail landscape. Thus, for Canadian investors seeking geographic exposure, there’s a lot to like about how TD is positioned.
With annualized 5% dividend growth and quarterly distributions that should be on the rise in short order, this is a top bank stock to consider buying for both its yield and its upside over time.
Bottom line
In my view, a portfolio holding both of these stocks should perform well over the long term, and both Restaurant Brands and TD remain top picks of mine here.
