Even as the TSX Index looks to cool off a bit after a hot start to the early autumn, investors should be on the lookout for the stocks of companies that have significant earnings momentum. In this piece, we’ll have a closer look at two names that still don’t look all too expensive relative to the tailwinds that could continue to drive earnings growth at a steady rate over the next 18 months. While the following names would be louder screaming buys on a bit of a near-term pullback, I still find them worthy bets as markets progress through a rather upbeat and somewhat optimistic fourth quarter.
Royal Bank of Canada
Royal Bank of Canada (TSX:RY) may be at new all-time highs of nearly $205 per share, but I still think there’s room to rise, even as the valuation looks fairly rich at 15.4 times trailing price to earnings (P/E). Undoubtedly, Royal Bank could make a run for the $300 billion market cap milestone by year’s end. If the quarterly earnings beat continues, perhaps the most premier of premium Canadian banks is worth picking up right here.
Looking into the new year, I’d look for the capital markets strength to continue, all while the big bank expands its retail banking presence. Additionally, let’s not forget about the bank’s digital efforts, which could literally pay big dividends over the long haul. Today, shares boast a fair, but not too stunning 3% dividend yield.
While it would be nice to wait for a dip under $200 per share, I certainly wouldn’t be against nibbling into a tiny position starting today, even if quarterly estimates have crept a bit higher since the last earnings beat. Perhaps the cautious tone on trade could keep estimates tempered. Of course, we’ll just have to wait and see when the next round of results comes in. In any case, I don’t expect the Royal Bank to disappoint.
Enbridge
Enbridge (TSX:ENB) is another dividend-growth stock that’s been clocking in the big capital gains for investors in recent years. Who would have known Enbridge, which was in the gutter just over two years ago, would be one of the nation’s fiercer comeback plays? Since the 2023 lows, shares have surged to a 60% gain, and there are no signs that shares of ENB are about to slow down.
After the latest 14% surge in the last three months, ENB stock is starting to get a bit expensive, now going for 24.4 times trailing P/E. That’s a pretty lofty price tag to pay for the midstream energy juggernaut. With a 5.45% dividend yield, which is close to the lowest it’s been in a while, waiting for a correction could prove wise.
Either way, I find ENB stock to be a worthy bet for investors seeking year-ahead upside and another big dividend raise. Even though the best days may be in the rearview, management still has plenty of tools to drive further quarterly beats. In the meantime, it’s time to get behind the technical strength.
