After a powerful multi-year rally, the Canadian stock market is no longer the obvious bargain it once was. Since 2021, iShares S&P/TSX 60 Index ETF has more than doubled investors’ money, turning a $10,000 investment into roughly $21,000.
Annualized returns of about 16% far exceed the market’s 10-year average of roughly 12%, and the past year alone delivered total returns close to 30%. When returns come that easily, experienced investors know it’s time to be selective.
Rather than chasing momentum, a smarter approach today is to lean into valuation discipline and dependable income. With the market yielding about 2.5%, investors should demand more, particularly from businesses facing uncertainty.
Targeting yields of 4% or higher, combined with solid fundamentals, can help protect capital while still offering upside. Against that backdrop, two TSX-listed stocks appear to be relatively compelling opportunities right now.
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A defensive energy leader with income appeal
Canadian Natural Resources (TSX:CNQ) is a textbook example of how scale, discipline, and shareholder focus can create long-term value. As one of Canada’s largest oil and gas producers, CNQ has built a reputation for returning capital through both dividends and stock buybacks.
The company has raised its dividend for 24 consecutive years and boasts a remarkable 20-year dividend growth rate of 20.7%. Even more impressive, its dividend growth accelerated over the past five years to roughly 23%. That consistency is no accident. Canadian Natural Resources maintains a strong balance sheet, invests only in high-return projects, and operates a diversified asset base with long reserve lives and low decline rates.
Operational efficiency is another advantage. With low maintenance capital requirements and a breakeven oil price in the low- to mid-US$40s per barrel, CNQ can remain profitable even during commodity downturns. Despite these strengths, the stock has largely moved sideways over the past year, missing much of the broader market rally.
At around $45 per share, CNQ offers a dividend yield of approximately 5.2%. Analysts see meaningful upside as well, with consensus price targets implying a discount of about 14% and near-term upside potential of roughly 16%. For income-focused investors, this energy stock looks to be a decent idea.
A beaten-down growth stock with a high yield
At the other end of the spectrum sits goeasy (TSX:GSY), a non-prime consumer lender known for its volatility — and its long-term wealth creation. The stock has fallen about 20% over the past year, reflecting investor concerns about credit risk and economic uncertainty. However, volatility has always been part of goeasy’s story.
Management understands its risk profile and actively manages it, expecting net charge-off rates of around 8.75% to 9.75%. Historically, its growth strategy has paid off. Over the past decade, goeasy increased diluted earnings per share by more than 11 times, translating into a compound annual growth rate north of 27%. A $10,000 investment 10 years ago would now be worth nearly $93,000.
Today’s pullback offers a rare entry point. At roughly $131 per share, the stock trades about 32% below its long-term average valuation, suggesting potential upside of close to 48% if sentiment improves and the valuation normalizes.
Importantly for defensive investors, goeasy is also a Canadian Dividend Aristocrat. Its dividend has grown at a 30% annual rate over the past decade, and the recent sell-off has pushed the yield to about 4.4% — nearly double its 10-year average of 2.3%.
For investors willing to tolerate risk and volatility, goeasy’s combination of income, growth, and valuation makes it one of the most intriguing opportunities on the TSX today.
