Top TSX Stocks to Buy Now for Real Wealth Later

Investors should consider investing in top TSX stocks that offer decent income to help support their financial future.

Kay Ng

Author Bio Kay graduated from the University of British Columbia with a Bachelor of Science in Computer Science and furthered her studies in financial markets, finance, and financial accounting. She began investing in dividend stocks in 2008, turning an early interest into a lasting passion. Over the years, Kay has refined her investment approach to focus on high-quality businesses, using fundamental analysis and valuation to identify long-term investment opportunities. Her investment research and articles have been featured in The Motley Fool, Sure Dividend, and Seeking Alpha. Outside of investing, Kay enjoys playing the piano, from popular songs learned by ear to challenging classical compositions. Her favourites include Fantaisie-Impromptu by Frédéric Chopin and La Campanella by Franz Liszt. Education Bachelor of Science (BSc) in Computer Science, University of British Columbia Further studies in financial markets, finance, and financial accounting Areas of Expertise Dividend stocks, fundamental analysis, company valuation, quality investing, long-term investing, business fundamentals, and identifying investment opportunities in high-quality companies. Social Media Profiles LinkedIn Favorite Investment Quotes “The best way to measure your investing success is not by whether you’re beating the market but by whether you’ve put in place a financial plan and a behavioral discipline that are likely to get you where you want to go.” — Benjamin Graham “A market downturn doesn’t bother us. It is an opportunity to increase our ownership of great companies with great management at good prices.” — Warren Buffett

Published October 22, 2024 6:00 am EDT

When it comes to wealth creation, few avenues compare to the potential of stock investing. With careful selection of top TSX stocks and some patience, investors can unlock significant financial growth over time. Here’s a closer look at two compelling stock options that could lead to real wealth.

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Magna International: A dividend dynamo

Magna (TSX: MG) is a cyclical stock currently trading at an attractively low price-to-earnings ratio, making it an intriguing option for savvy investors. After a period of volatility, the stock appears to be consolidating, signalling a potential upswing.

Over the last decade, Magna has shown impressive financial resilience, increasing its revenue per share at a compound annual growth rate (CAGR) of 7.1%. This growth has translated into solid operating income per share growth of 6.7%.

Despite the inherent risks of economic fluctuations, Magna has maintained a commitment to its shareholders by consistently paying and increasing dividends since 2010. With a 10-year dividend growth rate of 11%, it stands out as a strong choice for income-focused investors. The company’s ability to sustain such a dividend is supported by a robust balance sheet and conservative payout ratio, estimated to be around 35% of adjusted earnings and 46% of diluted earnings this year.

The stock has the potential for a 35% upside should it return to its long-term normal valuation. Priced at about $60 per share, Magna also offers a respectable dividend yield of nearly 4.4%, providing a solid foundation for returns. For those looking to make informed investment choices, Magna’s risk-reward profile positions it as a top contender in the blue-chip cyclical stock arena.

Brookfield Renewable Partners: Powering the future

Another promising name in the Canadian market is Brookfield Renewable Partners L.P. (TSX: BEP.UN). This renewable energy stock has rebounded impressively, recovering 39% from its earlier lows this year. Analysts suggest that it remains fairly valued, offering a good opportunity for investors keen on sustainable growth.

Brookfield Renewable is strategically positioned to capitalize on the ongoing global shift towards renewable energy. With a footprint in about 30 major power markets across North and South America, Europe, and the Asia Pacific, it boasts a diverse portfolio that includes hydro, wind, solar, and energy storage solutions. Its operational capacity stands at approximately 32,500 megawatts, complemented by a robust pipeline of about 157,000 megawatts in development projects.

The company benefits from an investment-grade balance sheet, with most of its debt being long term and fixed rate. This structure provides predictability in interest expenses and shields the company from rising rates.

Brookfield Renewable enjoys a liquidity cushion of US$4.4 billion, bolstered by its asset recycling strategy and partner capital, positioning it well for future growth opportunities. The company anticipates deploying at least US$8 billion in capital for acquisitions and development projects over the next five years.

Investors can look forward to consistent cash distribution growth. For example, BEP’s 10-year cash distribution growth rate was a CAGR of 5.7%. The company benefits from long-term contracts that insulate its cash flows from market volatility and inflation. Brookfield Renewable aims to grow its distribution by 5–9% annually, starting investors off with a commendable cash distribution yield of 5% today. This combination of growth potential and attractive returns makes Brookfield Renewable a stellar addition to any diversified investment portfolio focused on sustainable wealth.

The Foolish investor takeaway

In the ever-evolving landscape of stock investing, Magna International and Brookfield Renewable Partners present interesting cases for building real wealth. With their unique strengths and growth trajectories, these TSX stocks not only offer the potential for capital appreciation but also for generating income.