2025 has been quite the ride for the TSX. It started the year above 25,000, declined 10% to 22,500, and today is trading at 25,500. That’s a lot of volatility for the index in just a few short months.
This volatility reflects the trade uncertainties, along with risks related to the economy, the consumer, and the overall investment climate. Given this backdrop, I would maintain a conservative approach when investing.
Please read on as I discuss a couple of attractive TSX stock ideas.
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Enbridge: A leading TSX dividend stock
Enbridge Inc. (TSX: ENB) is the heart and soul of the energy infrastructure industry. Its infrastructure supports a diversified list of energy sources and locations within North America. For example, Enbridge is connected to all operating U.S. Gulf Coast liquified natural gas (LNG) facilities. Also, Enbridge is the largest crude export terminal in North America.
What this means is that Enbridge will be facilitating energy distribution for years to come. As a company, this translates into a low-risk, predictable business. One that has supported 30 consecutive years of dividend increases. And one that has become increasingly defensive.
Enbridge’s business has always been pretty low-risk, anchored by contracted/cost-of-service cash flows. The company’s recent acquisition of three U.S. utilities, which closed in 2024, has made it even more so. In the fourth quarter of 2024, Enbridge reported earnings per share (EPS) of $0.75, 17% higher than the prior year. This was primarily due to the addition of the utility acquisitions as well as higher Mainline system tolls.
In summary, Enbridge is currently well-positioned as we can expect continued global demand growth for energy. As far as Enbridge stock goes, it’s yielding a generous 6.1%. Also, Enbridge stock is trading at 19 times next year’s earnings estimates, which are forecast to rise significantly in the next few years as the company’s positive business fundamentals continue to take shape. I still think Enbridge is a stock that’s grossly undervalued.
Aecon
The other TSX stock that I’d invest in today has exposure to another one of the major secular trends today – the infrastructure spending boom. Aecon Group Inc. (TSX: ARE) is one of Canada’s largest publicly traded construction and infrastructure development companies.
Aecon stock has rallied nicely over the last three years. In fact, it’s up a respectable 27% in this timeframe. If we add that capital return to the company’s annual dividend of $0.76 (for a roughly 4% yield), we can see that this stock has rewarded shareholders nicely. Yet, it’s pretty undervalued today, trading at a mere 10 times next year’s earnings estimate and 14 times the 2027 earnings estimate.
Looking ahead, I expect Aecon’s stock to continue its climb higher. My view is based on what I see as the prospects for Aecon in the coming years. There’s simply a lot of infrastructure spending that needs to happen in the next many years. And Aecon is front and centre of all this action. The company has a diversified mix of projects by geography, sector, contract size, and type (see the image below).
Simply put, there is a significant amount of infrastructure investment underway in North America. The current infrastructure is simply old and in need of replacement and/or updating. Also, the transition to a net zero economy is necessitating significant investments in order to build out the infrastructure to support this transition.
So in summary, government infrastructure laws and spending plans continue to be positive. And companies continue to build out their renewable energy infrastructure. Both are driving strong demand for Aecon. In fact, Aecon’s backlog currently stands at $9.7 billion, 54% higher than last year.
The bottom line
Both Enbridge and Aecon are benefiting from positive fundamentals and positive trends. Also, they are both pretty undervalued given this and their strengths. In my view, these two TSX stocks are a great place to invest in today.
