Here Are My 2 Favourite TSX Stocks to Buy for December

These two TSX stocks are strong, stable, and valuable given recent prices. Why wait another minute before the year ends?

Amy Legate-Wolfe

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. Before joining Motley Fool Canada, she 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. Follow Amy on LinkedIn and Canada Stock Digest. 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 November 28, 2024 3:30 pm EST

As the year winds down, the TSX offers a unique opportunity for investors. Historically, the market often experiences a boost during the final months of the year due to the “Santa Claus rally” and renewed investor confidence. With Canada’s economy proving resilient and companies reporting solid earnings, this is a great time to consider TSX stocks for your portfolio. Two top contenders for long-term growth and stability are OpenText (TSX:OTEX) and Waste Connections (TSX:WCN). Both offer robust financials and future outlooks.

Start line on the highway — Source: Getty Images

The TSX stocks

OpenText, a leader in enterprise software, has been steadily transforming itself through strategic acquisitions and innovation. Despite facing headwinds earlier in the year, the TSX stock posted a solid earnings growth of 4.3% year over year in its most recent quarter. Its revenue of $5.61 billion for the trailing 12 months is impressive, and its forward price-to-earnings (P/E) ratio of just 8.33 suggests significant undervaluation relative to peers. Plus, the TSX stock’s 3.4% forward dividend yield is a sweetener for income-seeking investors.

Waste Connections, however, has proven its mettle as a reliable performer in the waste management sector, an industry often insulated from economic downturns. With revenue growth of 13.3% year over year and a profit margin exceeding 10%, Waste Connections has shown exceptional financial discipline. Its forward P/E of 25.38 reflects strong growth expectations. And the TSX stock’s steady dividend payouts further reinforce its status as a shareholder-friendly stock.

Weathering the storms

Both OTEX and WCN have demonstrated a knack for weathering market volatility. OpenText’s adaptability to cloud-based solutions and artificial intelligence initiatives align with the broader tech sector’s shift, making it a solid pick for growth. Meanwhile, Waste Connections benefits from its recession-proof business model and strategic acquisitions that expand its North American footprint.

Looking at past performance, OTEX’s stock has seen significant recoveries following dips, demonstrating resilience. Its recent trading price, around $43.11 at writing, is below its 52-week high of $60, suggesting room for upside as the broader tech market regains momentum. Similarly, WCN is trading near 52-week highs, reflecting consistent investor confidence and a history of climbing steadily.

Looking ahead

Future prospects also look bright for both companies. OpenText’s commitment to reducing debt, coupled with its ongoing integration of Micro Focus assets, should drive margin improvements and cash flow growth. Waste Connections is expected to continue benefiting from urbanization trends and regulatory support for waste management, making it a long-term defensive play.

Dividend lovers will appreciate both stocks. OpenText’s payout ratio of 58.53% indicates a sustainable dividend with room for growth, while Waste Connections’s upcoming dividend of $1.76 shows its commitment to returning value to shareholders.

For investors building a diversified portfolio, these two stocks complement each other beautifully. OpenText represents the growth and innovation of tech, while Waste Connections offers stability and predictability. Together, these TSX stocks provide a balanced approach to navigating the TSX market’s potential year-end rally.

Bottom line

As the holiday spirit infuses the market with optimism, OpenText and Waste Connections stand out as excellent picks. The TSX stock’s financial strength, coupled with growth trajectories and dividends, make them worthy additions to any Canadian investor’s portfolio. So, grab some cocoa, review those earnings, and consider these gems before the new year rings in.