For investors who are thinking about which stocks to buy in this current market environment, know you’re not alone. The TSX in Canada (and many stock indices around the world) are now trading at or near all-time highs. Accordingly, finding the proverbial “needle in the haystack” is much more difficult today than it might have been a few years ago.
That said, I do think there are a number of TSX stocks that make sense to own from a valuation and growth perspective. The following three companies provide not only a reasonable valuation and solid growth prospects, but a meaningful dividend yield as well.
Let’s dive into why these companies are worth owning in this market. For those with a long-term investing time horizon, I’d say dollar-cost averaging into such names right now makes the most sense.
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Fortis
Utility giant Fortis (TSX:FTS) has been a company I’ve been pounding the table on for quite some time. And investors who listened in past years would be way up at the time of writing, as the chart below shows.
I have no idea if this rally can continue from here. But what I do know is that Fortis sports one of the most defensive business models of any TSX stock and has been one of the most consistent in terms of cash flow growth. As most investors are well aware, a company’s valuation is supposed to be comprised of a discounted model of its future cash flows. So, on that metric alone, this is a stock to own.
But perhaps what I like most about Fortis is the company’s durable and sustainable dividend growth model. As the company increases the prices it charges residential and commercial customers for power and heat, it increases its dividend in corresponding proportion over time.
For investors who have stuck with Fortis over the long haul, this has meant average annual increases in the 5% to 7% range.
That’s good enough for me, considering the stock’s current valuation of just 19 times trailing earnings.
Restaurant Brands
Another top company I’ve been very bullish on for a very long time is Restaurant Brands (TSX:QSR).
The parent company of Tim Horton’s (every Canadian’s favourite coffee chain), Burger King, and other world-class fast food banners, Restaurant Brands has grown into a company with a market capitalization of more than $40 billion in a sector many expect to continue to show strong growth over time.
In addition to the company’s growth profile, which remains among the best in class thanks to its Asian expansion and expansion into other global markets, the company has continued to provide strong capital returns to investors. On the dividend front, the company’s 3.8% yield is ultra-attractive, particularly when compared to where Canadian government bonds currently yield.
Finally, I think the deciding factor that really tops off my view that this is a company to own for the long term is Restaurant Brands’ overall positioning. As a fast food giant, downturns have typically brought about sales increases for this sector as diners looking to eat away from home choose the most cost-effective options.
Assuming this time won’t be different, the next downturn could be the key catalyst investors look to as a reason to buy this defensive gem. That’s my take at least.
