Canadian blue-chip stocks remain rock-solid picks amid market volatility, offering reliable dividends and growth potential for the next three years. Investors should zero in on companies with fortress balance sheets and proven cash flows right now.
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Toronto-Dominion Bank
In the world of mega-cap Canadian banks, Toronto-Dominion Bank (TSX: TD) remains one of my top picks.
TD Bank stands out as a leading Canadian bank from the perspective of innovation and growth. Among the first banks to utilize technology to remove the need for consumers to come into the bank for services like cheque deposits and other transactions, TD’s highly efficient footprint has served investors well.
Indeed, judging by the chart above, it’s clear most investors in the market agree with this view. And with interest rates on the decline, the yield curve steepening, and net interest margins surging as a result, TD’s bottom line has seen a big boost in recent quarters.
This company still carries a dirt-cheap price-earnings multiple around 10 times, despite its recent stock price surge. Investors are simply pricing in much more growth into this stock than has been seen in prior years. I think that’s the right take, and I’m still bullish on TD stock.
Enbridge
In the energy infrastructure sector, Enbridge (TSX: ENB) is the pipeline powerhouse you want in your portfolio.
It boasts an unmatched 27-year dividend growth streak and a juicy 5.4% yield on its massive valuation of more than US$110 billion. That places Enbridge as one of the most valuable pipeline companies in the world, with a reach like few other companies.
With thousands of kilometres of laid pipe, Enbridge’s long duration assets provide incredible cash flow stability. That’s because most of the company’s revenue and earnings are driven by long-term volume-based contracts, which provide stability no matter where energy prices are headed.
That said, with oil prices surging this week amid a new U.S/Israel-Iran conflict, there’s a lot of upside for the company, should it be able to renew some contracts at more favourable prices over time.
Telus
Perhaps a more speculative pick at current levels, and given its price action of late, I’m thinking Telus (TSX: T) could be worth considering at its current multiple and given its strong market position in the Canadian telecommunications sector.
With nearly two decades of consecutive dividend hikes, Telus’ streak is certainly at risk. Now yielding 9%, with the risk of a potential dividend cut (or at least no raise in the coming year) clearly being priced into the market, the above chart shouldn’t be surprising to many investors.
That said, the company’s status as a key player in the oligopoly, which is the Canadian telecom sector, is notable. This is a company with very durable cash flows, driven by essential services (no one is realistically going to go without paying their mobile phone, data or internet bills). That’s the kind of defensive posture I think many investors will aim to take in the months to come.
If Telus can get its balance sheet under control and ensure any further market share losses are contained, this is a stock I think may be worth a speculative buy after this notable decline.
