As the TSX Index continues marching towards new heights, new investors might have to take a step back and consider what’s still a great deal. Of course, there’s nothing wrong with buying shares of a company while it’s making new highs, especially if the valuation metrics still aren’t absurd and the tailwinds are really starting to mount. For the most part, the TSX Index’s run is driven by some real tailwinds that might just help Canadian stocks follow up on 2025 with another impressive performance.
While time will tell if the year’s gains will top last year’s, the first quarter and a half seems to be painting a pretty picture, with many of the top financial and energy names continuing their rallies as though the page never did turn on the year. With oil prices rocketing higher again, suddenly Canada’s energy names became a must-have hedge.
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Dirt-cheap dividends are still out there
To make the value proposition better, such names still seem cheap, with huge yields and big cash flows up ahead. In any case, it’s hard for value investors to justify buying high with the intent of selling higher. Personally, I think buying high and just hanging on for the next few decades could be the smartest move. Consider all the dividends you’ll collect, and all the dividend raises you’ll get over such a timeframe!
For those looking for a dividend payer poised to make up for lost time, though, I think Nutrien (TSX: NTR) stands out as a sold-off play that’s still down as the rest of the market surges. At the time of this writing, shares of the fertilizer producer are down just shy of 10%, and the yield is around 3% again.
Of course, you had to think that the parabolic move experienced earlier in the year would be corrected swiftly. And now that NTR stock is ready to move on after the latest descent off 52-week highs, I do think the name has what it takes to continue impressing investors. Indeed, the war in Iran has introduced serious volatility to commodities.
Nutrien stock may still be underpriced, given the Iran war
And given a lot of agricultural commodities move through the Strait of Hormuz, there’s a global fertilizer shock in addition to an energy shock to think about. Either way, Nutrien is a very impressive operator with efficient production and a steady retail business that can still enjoy margin gains from here.
Of course, higher fertilizer prices might lead to demand destruction at some point down the line. For now, though, I think higher prices and an uptick in demand are hard to ignore as the next steps with the conflict in the Middle East play out.
While there’s no shortage of geopolitical variables (from the war in Iran to tariffs), I still think Nutrien is a great long-term hold. Analysts over at Bank of America recently praised the “best-in-class operator” and noted that shares are going for around “pre-conflict levels.”
Indeed, after that latest dip, I think investors should take another careful look at Nutrien, especially now that some are expecting the Middle East crisis to resolve sooner rather than later. Given the risks, there might be asymmetric upside to be had in a name that’s going for just 14.8 times forward price-to-earnings (P/E).
