Canadian investors looking to put $2,000 or so to work still have plenty of options, even as the TSX Index runs hot and towards new all-time highs. In this piece, we’ll check out a pair of names that might make sense to consider picking up, especially if you’ve got a growing cash pile that’s sitting around collecting an interest rate that doesn’t keep up with the pace of inflation. While some may view the market as getting a bit on the expensive side after a robust rally, I’d argue that those who pick their spots can still do extraordinarily well over the next three to five years.
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Sun Life Financial
Shares of Sun Life Financial (TSX: SLF) have been melting up in the past month, and as higher highs get hit. Yet, I still think it might be too early to take profits, especially when you consider how quickly things behind the scenes have been improving and the still-reasonable 16.2 times trailing price-to-earnings (P/E) multiple.
And, of course, the 3.7% dividend yield is not bad either for those looking to top up their passive income streams. As the firm continues to grow its asset management business while leveling up its growth in Asia, I wouldn’t discount the potential for further earnings surprises going into the second half.
Add the firm’s digital transformation into the equation, which has already started paying hefty dividends, and shares of SLF seem to be moving into a Goldilocks environment of sorts. It’s never fun to chase heated stocks, but I do think that things could get even brighter for shares of Sun Life as the firm continues to blow away on earnings. If you want a solid, growing dividend and serious fundamental momentum, I can’t think of a better name in the insurance space right now.
Royal Bank of Canada
Royal Bank of Canada (TSX: RY) stock might be kind of pricey for a bank stock, with shares going for 16.7 times trailing P/E. The dividend yield is also a few basis points below 3%, making it a seemingly mediocre time to pick up shares of Canada’s largest company. Like the rest of the Big Six Canadian banks, though, I think paying a slight premium isn’t all too bad an idea, especially when you consider the dividend growth that could lie ahead.
As the synergies from the prior acquisition of HSBC continue flowing in, while Royal Bank continues betting big on AI innovations (it’s one of the most tech-savvy big banks in the country), I certainly wouldn’t bet against the name. Of course, just about all banks have noticed the potential of AI. But with the new Borealis research arm, I do think Royal Bank might have the tech and talent to achieve AI gains a bit earlier than its peers.
In my view, Royal Bank isn’t just a user of AI; it’s becoming a major builder and monetizer of the technology, and that alone, I think, makes RY shares a preferred pick in the Big Six, even with the modest 2.7% yield.
