There is a myriad of opportunities out there for investors to put $25,000 to work in this market. Of course, any significant sum such as this deserves plenty of scrutiny. The question is whether choosing a portfolio full of growth stocks or dividend-paying blue chips makes more sense.
Sticking with a more defensive tone over the next year or two may be the preferable option, considering how high the market has run of late. Accordingly, I’ve put together three stocks I’m bullish on right now as companies I think have the potential to outperform in the coming years.
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Restaurant Brands
Restaurant Brands (TSX: QSR) is a company I’ve covered quite a lot in recent years. The fast-food giant is the parent company of well-known quick-service restaurant chains such as Tim Hortons, Burger King, and Popeyes. These world-class banners continue to provide stable earnings and cash flow growth and are expected to continue to do so as the company expands into new markets over time.
Results in past quarters have been somewhat constrained as the company continues to battle a series of headwinds. From competitive forces in the market to the rise of GLP-1 drugs, there are reasons why some investors are souring on the company. And given Restaurant Brands’s relatively small comparative same-store sales increase of just 0.3% this past quarter, this view certainly makes sense.
However, Restaurant Brands is seeing strong traction in its Tim Hortons division, and various menu innovations and efficiency maneuvers could spill over into the company’s other banners as Restaurant Brands rolls out its strategic plan across its entire enterprise. I think over the long term, this company will continue to provide meaningful cash flow. The fact that this stock now trades at just 15 times earnings with a 3.7% dividend yield makes this an attractive option for long-term investors seeking stability and income moving forward.
Fortis
Fortis (TSX: FTS) is among the top dividend stocks in the market that I think long-term investors may want to consider right now. The company’s +50-year track record of dividend increases looks poised to continue for the foreseeable future.
A top utilities giant serving millions of customers across North America (and some Caribbean countries), Fortis has relied on its extremely stable (and growing) cash flows coming from its portfolio of regulated gas and electricity businesses. Most investors flock to Fortis for the 4.2% dividend yield (which tends to rise over time). Indeed, that’s my main focal point when it comes to this utility company.
That said, I think there are other growth factors investors want to keep an eye on. Much ado has been made around the surge in energy consumption tied to the rise of artificial intelligence technologies. This surge will certainly benefit utility companies that supply power to both residential and commercial clients. If we do see the kind of parabolic move in the energy consumption curve some are predicting, the run the utility sector as a whole has been on should continue. That should undoubtedly benefit Fortis investors.
With a compounded annual growth rate of almost 6% over the past decade, Fortis’s dividend increase plan and its capital spending trajectory ($22.3 billion over the next five years) should support the continued rate of growth the company will pass onto investors. That’s a model I can get behind.
Toronto-Dominion Bank
Rounding out this list of top stocks to consider investing $25,000 in for this fiscal year is Toronto-Dominion Bank (TSX: TD). TD continues to be among the leading Canadian banks (and global banks, for that matter), with a strong U.S. presence making this giant more of a truly international play, at least when it comes to the world of Canadian banks.
The company has seen strong growth in recent years, though past quarters have been more muted. The company’s profit of $3.6 billion in its fourth quarter was down slightly on a year-over-year basis as provisions for credit losses and regulatory expenses increased. I think most investors in the market expect such dynamics to continue, and that’s partly why TD stock has been stuck in a rut in recent years.
That said, the fact that TD stock has been so stable amid these various headwinds does paint a rather strong picture of the company’s future. I think once we emerge from this period of uncertainty around interest rate policy and growth-related concerns, TD should come out as a long-term winner.
