The escalation of the trade war amid the announcement of reciprocal tariffs on goods imported by other countries to the United States has raised the fear of a global economic slowdown. Amid these uncertainties, the S&P/TSX Composite Index has declined 7.7% since the beginning of last week. However, long-term investors should utilize these pullbacks to accumulate quality stocks and earn superior returns. Against this backdrop, here are my three top picks that are available below $50.
Hydro One
Hydro One (TSX:H) is a Canadian pure-play electric utility company that serves 1.5 million customers across Ontario. The company’s financials are less prone to economic cycles, as around 99% of its business is rate-regulated. Also, the company has grown its rate base at a 5% CAGR (compound annual growth rate) since 2018 and has undertaken several cost-cutting initiatives, driving its financials and cash flows. Supported by financial growth and healthy cash flows, H stock has raised its dividends at an annualized rate of over 5% since 2016 and currently offers a forward dividend yield of 2.6%.
Moreover, the rising electrification, technological advancements, and focus on decarbonization have increased electricity demand, thus benefiting Hydro One. The company also continues with its $11.8 billion capital investment plan, which could grow its rate base at a 6% CAGR through 2027. Along with these expansions, favourable rate revisions and cost-cutting initiatives could boost its financials in the coming quarters. Driven by these healthy growth prospects, Hydro One expects its EPS (earnings per share) to grow 6–8% through 2027 and is also hopeful of raising its dividends at an annualized rate of 6%. Considering all these factors, I am bullish on Hydro One despite the uncertain macro environment.
Savaria
Another top Canadian stock you can buy under $50 right now is Savaria (TSX:SIS), which offers accessibility solutions to the physically challenged. Given its multiple manufacturing facilities and solid distribution network, the company markets its accessibility solutions worldwide. Last year, its topline grew 3.7% to $867.8 million. Solid organic growth and favourable currency translation overcame the impact of its divestments to boost its sales.
Besides, its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) grew by 24% to $162.2 million, while the adjusted EBITDA margin expanded by 310 basis points. Its net debt-to-adjusted EBITDA ratio improved from 2.07 at the end of 2023 to 1.63. Also, it ended the year with $242.8 million of available funds, supporting its future capital investments and working capital requirements.
Further, Savaria is focusing on innovative product development, production capacity expansion, and cost savings from streamlined procurement, which could support its financial growth in the coming quarters. Meanwhile, the company’s management expects topline growth of 6.6% this year. Also, they are projecting its adjusted EBITDA margin to come between 17–20%, compared to 18.6% in 2024. So, its growth prospects look healthy.
Telus
Although the telecommunication sector has been under pressure over the last few years amid unfavourable policy changes and high interest rates, I have chosen Telus (TSX:T) as my final pick due to its healthy cash flows and consistent dividend payouts. The Vancouver-based company enjoys healthy cash flows due to its growing customer base and recurring revenue streams, thus allowing it to raise its dividends consistently. Since May 2011, the company has raised its dividends 27 times, while its forward yield is 7.9% as of the April 7 closing price.
Meanwhile, Telus’s expanding 5G and broadband infrastructure, compelling bundled offerings, and improving operating services could continue to expand its customer base and drive financials. It has planned to make a capital investment of $2.5 billion this year, strengthening its infrastructure. Further, its other growth segments – Telus Health and Telus Agriculture & Consumer Goods – are growing at a healthier rate. Considering the essential nature of its business in this digitally connected world and its growth prospects, I believe that Telus would be an excellent long-term buy.
