With markets sitting near record highs and the economy at risk of a downturn due to soaring energy prices, investors with new cash to put to work in a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio are wondering which stocks might still be attractive right now.
Trying to time the tops and bottoms in the market is difficult, so investors should normally focus on owning good companies that have long track records of delivering solid earnings while paying attractive dividends.
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Bank of Nova Scotia
Bank of Nova Scotia (TSX: BNS) is up 57% in the past year. The stock is bouncing back from a recent dip, now trading near $102, which isn’t far off the record high around $106 it hit in February.
BNS still provides investors with a 4.3% dividend yield at the current share price, so new buyers of the shares get paid well to ride out any additional turbulence.
Bank of Nova Scotia is making progress on a turnaround plan that is streamlining the business and will see the bank invest more growth capital in the United States and Canada, instead of in Latin American where Bank of Nova Scotia invested billions of dollars over the past few decades.
The bank already sold its operations in Colombia, Panama, and Costa Rica. It still has a large presence in Mexico, Chile, and Peru. The purchase of a 14.9% stake in KeyCorp, an American regional bank, in 2024 gave Bank of Nova Scotia a platform to expand its presence in the American market.
An economic downturn could drive up unemployment while interest rates are still elevated, putting pressure on households and businesses that are carrying too much debt. The mortgage cliff has so far been avoided, but the Canadian banks aren’t completely in the clear, so there could be some headwinds coming for the sector.
That being said, Bank of Nova Scotia has a strong capital position to ride out a downturn and maintains the balance sheet strength to make strategic acquisitions that might arise in the next few years.
Enbridge
Enbridge (TSX: ENB) trades below $73 per share at the time of writing, compared to a recent high of $77. The pullback gives investors a chance to buy a dip in a stock that is up nearly 20% in the past 12 months and has been on an upward trend for more than two years.
Enbridge is working on a $39 billion capital program that will help drive earnings and distributable cash flow higher over the next few years. The company has also been aggressive with acquisitions, adding export facilities, renewable energy assets, and natural gas distribution utilities, primarily located in the United States.
The boost to cash flow should support ongoing dividend increases. Investors who buy ENB stock at the current level can get a dividend yield of 5.3%.
Canadian Natural Resources
Canadian Natural Resources (TSX: CNQ) trades near $62.50 at the time of writing, down from a recent high close to $71. The pullback is due to falling oil prices as investors book profits after a big run in the past couple of months.
Near-term volatility should be expected, but additional downside would be an opportunity to add to the position. CNRL will benefit from rising demand for Canadian oil and natural gas. New pipeline capacity to the Canadian coast is likely on the way and CNRL is a major energy producer, while also possessing significant reserves across the product spectrum.
Investors can currently get a 4% dividend yield from CNQ. The board raised the dividend in each of the past 26 years.
The bottom line
Bank of Nova Scotia, Enbridge, and Canadian Natural Resources pay good dividends that should continue to grow. If you have some cash to put to work, these stocks deserve to be on your radar.
