Investing in the stock market is not just about buying the dip and selling the rally. Knowing what you want from your money is crucial in determining which dips to buy. If you want to put $10,000 to work and help you get growth and income for the long term, you might have to choose two different stocks. However, there are a few stocks that can give you both.
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Three brilliant TSX stocks for growth and income
A good strategy could be to invest in three stocks – one for income, one for growth, and one for both.
Starting with the stock that gives you income and even grows your money in the long term.
goeasy
The non-prime lender goeasy (TYSX:GSY) is a stock that has given regular quarterly dividends and even grown them by strong double digits in 10 out of the last 11 years. goeasy is in the business of giving unsecured and secured loans through easyfinancial and easyhome brands. Over the years, it expanded its business horizontally by
- Offering new loan products — point-of-sale financing and automotive loans — and ancillary services like creditor insurance and warranty coverage;
- Expanding its distribution channel;
- Expanding its Canadian presence; and
- Strengthening its underwriting model to give loans to more customers while controlling credit risk.
All these efforts have helped the lender increase its loan portfolio over the years and grow its share price by 800% in the last 10 years, which is 10 times the 79% rally of the TSX Composite Index.
goeasy stock also offers a 3.8% dividend yield from the interest earned on the loan portfolio. The yield might look small, but if you had held the stock for 10 years, the $0.5 dividend per share would have grown to $5.84. A $3,000 investment in goeasy in June 2015 would have bought you 154 shares, which are now worth $23,639, and have increased your annual dividend from $77 to $899.
Now is a good time to buy and hold the stock, as high credit risk has pulled down the share price. It is trading at a forward price-to-earnings ratio of 8.71, below its five-year average of 10.76.
Bombardier stock
Business jet maker Bombardier (TSX:BBD.B) is a growth-oriented stock that can give you double-digit capital appreciation. Although the management is considering paying dividends in the next two to three years as its free cash flow (FCF) stabilizes, meaningful returns will come from capital appreciation. Here’s why.
Bombardier’s main business is selling business jets. The order book for business jets can fluctuate, which would be reflected in its share price. For instance, the company completed the flight test of its next-generation Global 8000 in May, hinting at a better product mix in the future. Moreover, the defence and pre-owned business jet verticals present opportunities to boost orders and grow the share price. As for dividends, the business jet maker could use its recurring revenue from after-market services.
A $3,000 investment in Bombardier stock in June 2020 is now $23,000. This stock tends to rally in the second half as aircraft delivery volumes surge and free cash flow comes in. Although the stock has already jumped 32% from its April dip, there is more upside as the company secures orders for Global 8000.
Telus stock
You have the growth, now comes the dividend. Many dividend stocks intend to help you generate passive income for your retirement. They offer dividend-reinvestment plans (DRIP) and even grow them annually to adjust for inflation. You can bank on them to pay dividends in every market condition, thereby complementing your pension. Telus (TSX:T) has a 21-year history of growing dividends. It offers DRIP to automate your retirement planning by accumulating dividend-paying shares.
You can be assured about the dividends as Telus pays them using subscription money. The dividend-growth rate has slowed from 7-10% to 3-8% as competitive pricing and network sharing reduce its margins. However, it is working on monetizing its 5G network, which will help strengthen its balance sheet and FCF. This could help it grow dividends for years to come.
You could consider investing $4,000 now while the stock trades closer to its 10-year low and lock in a 7.4% dividend yield.
