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- Brian Paradza, CFA
Retirees: 3 Canadian Stocks You Can Confidently Own for the Next 20 Years

funds, money, nest egg

Canadians entering retirement age may still have plenty more years to remain invested in the stock market. The average life expectancy in Canada for an infant born today is 81.75 years, according to Statistics Canada. The average retirement age in Canada rose from 62.4 years in 2011 to 64.4 in 2021. Although workers are staying longer in employment than they did a decade ago, they are living longer too. A 64-year-old Canadian today may expect to live for another 21.72 years, up from 21.36 years back in 2011.

Thus, a Canadian retiree living in Canada may easily live for more than 20 years off retirement savings, receiving pension payouts and withdrawing from investment portfolio(s). For someone retiring in good health, 100 could come up. There’s a real possibility of outliving one’s portfolio. For certain, careful retirement planning is important.

Therefore, some capital growth may still be required in a retirement portfolio.

Well-established dividend-paying stocks are usually a good source of stable growth and recurring passive income. Retirees could confidently buy and hold TSX dividend growth stocks including Royal Bank of Canada (TSX:RY) stock, Fortis Inc. (TSX:FTS) shares, and CT Real Estate Investment Trust (TSX:CRT.UN) units over the next 20 years and expect to receive growing dividend income, and enjoy some capital growth, too.

Why buy Royal Bank of Canada (RBC) stock?

The Royal Bank of Canada is Canada’s largest local chartered bank with a staggering $184 billion market capitalization. Rising interest rates improve the bank’s interest spreads while economic growth in the bank’s target markets supports organic revenue and earnings growth. I like RBC stock for its accretive acquisitions, too.

RBC announced a $13.5 billion acquisition of HSBC Canada on Tuesday, which may grow Royal Bank’s asset base by $134 billion and increase the bank’s consensus earnings per share outlook for 2024 by more than 6%. The acquisition may close in late 2023. RY will have a higher asset base from which to harvest income and sustain dividend growth.

The bank has paid dividends since 1870. Investors in RBC stock have enjoyed 11 years of dividend growth so far. The current quarterly dividend yields 3.8%.

Investors with a long-term focus may buy and hold RY stock over the next 20 years with confidence that the financial giant will remain committed to its regular dividend growth policy, keep perfecting its art of accretive acquisitions, and profitably serve a growing client base.

$10,000 invested in RBC stock 20 years ago could have grown to more than $96,600 today, with consistent dividend reinvesting.

Fortis Inc.

Fortis is a $25.7 billion North American-regulated gas and electric utility industry. Utilities remain a reliable source of regulated cash flows and growing passive income. FTS stock is a utility stock to buy and hold for long-term growth and growing passive income.

The utility’s 49-year dividend growth streak remained intact through the past five recessions – a reputation that may remain intact through near-term economic downturns. The company’s strong balance sheet may sustain it through high inflation and soaring interest rate regimes. Meanwhile, its $22.5 billion five-year capital plan, which is largely funded from internal cash flows, helps grow its rate base and distributable cash flows.

Fortis stock’s current quarterly dividend yields a respectable 4.2% annually. Management has committed to a 4%–6% annual dividend growth rate through 2027. Given a clean track record, investors may expect the company to follow through with its dividend growth guidance.

$10,000 invested in Fortis stock 20 years ago, with dividendd reinvested, could have grown nearly nine-fold to about $90,000 today.

CT Real Estate Investment Trust (CT REIT)

CT REIT, the landlord to Canadian Tire Corp (TSX:CTC.A), is a real estate stock to confidently buy and hold for the next 20 years of organic cash flow growth. Additionally, CTC.A has a well-covered and increasing 5.6% distribution yield.

The trust’s high-traffic, fully occupied, premium-quality real estate portfolio has supported nearly 10 consecutive years of growing income distributions. It will most likely remain a reliable source of recurring, bond-like contracted rental cash flows.

Most noteworthy, real estate investment trusts (REITs) are the best highly liquid, low-cost, low-risk, and high-yielding way to invest in diversified real estate assets.

CT REIT is reliant mostly on internal cash flows to fund its sustainable and accretive growth plans. It has a low debt ratio and most of its debt is fixed rate to dampen any negative impacts from interest rate increases on earnings and cash flows. Units may revalue higher as the trust continues to distribute growing passive income to investors.

The post Retirees: 3 Canadian Stocks You Can Confidently Own for the Next 20 Years appeared first on The Motley Fool Canada.

Should You Invest $1,000 In Ct Real Estate Investment Trust?

Before you consider Ct Real Estate Investment Trust, you’ll want to hear this.

Our market-beating analyst team just revealed what they believe are the 5 best stocks for investors to buy in November 2022 … and Ct Real Estate Investment Trust wasn’t on the list.

The online investing service they’ve run for nearly a decade, Motley Fool Stock Advisor Canada, is beating the TSX by 15 percentage points. And right now, they think there are 5 stocks that are better buys.

See the 5 Stocks
* Returns as of 11/4/22

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More reading

Algonquin Power Stock: Time to Buy or Buyer Beware? How Investing in RY Stock Could Bring in Handsome Passive Income 2 Unstoppable Dividend Stocks to Load Up in Your TFSA Canadians: 2 Rock-Solid Utility Stocks You Can Trust for the Long Haul 3 Top TSX Stocks to Buy if the Interest Rate Hike Slows

Fool contributor Brian Paradza has no positions in any of the stocks mentioned. The Motley Fool recommends FORTIS INC. The Motley Fool has a disclosure policy.

- Ambrose O'Callaghan
Should You Invest in Absolute Software Stock Right Now?

Question marks in a pile

Absolute Software (TSX:ABST) is a Vancouver-based company that develops, markets, and provides software services that support the management and security of computing devices, applications, data, and networks for various organizations. Today, I want to discuss whether Canadians should look to snatch up shares of this tech stock, as we look ahead to December. Let’s jump in.

How has this tech stock performed in 2022?

Shares of Absolute Software have climbed 13% in 2022 as of early afternoon trading on November 29. The stock is now up 16% in the year-over-year period. Unlike its peers on the S&P/TSX Composite Index, this tech stock has built considerable momentum since the spring season. The stock has been on a tear since bottoming out in the first two weeks of May 2022.

Here’s why I’m excited about Absolute Software’s long-term prospects

This company offers investors exposure to the burgeoning cybersecurity space. Specifically, the endpoint and zero trust security spaces.

Endpoint security involves securing endpoints or entry points of end-user devices like desktops, laptops, and mobile devices. The global endpoint security market was estimated to be valued at US$12.9 billion in 2020, according to a report from Fortune Business Insights. Meanwhile, that researcher projects that this market will grow from US$13.9 billion in 2021 to US$24.5 billion in 2028. This would represent a compound annual growth rate (CAGR) of 8.3% over the forecast period.

Zero trust security is a framework that requires all users to be authenticated, authorized, and continuously validated for security configuration before being granted access to applications and data. Moreover, market researcher Grand View Research recently estimated that the global zero trust security market was worth US$19.8 billion in 2020. It projects this market to deliver a compound annual growth rate of 15% from 2021 through to 2028.

Should investors be encouraged by its recent earnings?

Absolute Software unveiled its first-quarter fiscal 2023 earnings on November 8. The company delivered revenue growth of 23% to $53.6 million. Meanwhile, adjusted revenue jumped 11% to $54.2 million. Cash from operating activities were reported at $15.2 million — up from $0.6 million in the first quarter of fiscal 2022.

President and chief executive officer Christy Wyatt praised the company’s execution in the first quarter. On the business front, Absolute Software was able to add British Telecom to its carrier partners. Meanwhile, it partnered with Qualcomm Technologies and Insyde Software in September. Looking ahead, the company has not changed its positive financial outlook for the remaining three quarters in fiscal 2023.

Absolute Software: Should you buy today?

The Relative Strength Index (RSI) is a technical indicator that measures the price momentum of a given security. This tech stock last had an RSI of 42. That puts Absolute Software a little outside technically oversold territory. It did slip into the red earlier in November.

Absolute Software is trading in favourable value territory compared to its industry peers. In the first quarter of fiscal year 2023, the company declared a quarterly dividend of $0.08 per share. That represents a 2.4% yield. I’m looking to snatch up this exciting tech stock for the long haul.

The post Should You Invest in Absolute Software Stock Right Now? appeared first on The Motley Fool Canada.

Should You Invest $1,000 In Absolute Software?

Before you consider Absolute Software, you’ll want to hear this.

Our market-beating analyst team just revealed what they believe are the 5 best stocks for investors to buy in November 2022 … and Absolute Software wasn’t on the list.

The online investing service they’ve run for nearly a decade, Motley Fool Stock Advisor Canada, is beating the TSX by 15 percentage points. And right now, they think there are 5 stocks that are better buys.

See the 5 Stocks
* Returns as of 11/4/22

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More reading

The Smartest Stocks to Buy With $20 Right Now and Hold Forever 2 Growth Stocks to Invest $500 in Right Now 3 Growth Stocks I’d Buy Under $30 3 Canadian Cybersecurity Stocks to Keep an Eye On 3 Canadian Growth Stocks I’d Buy Under $20

Fool contributor Ambrose O’Callaghan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Absolute Software Corporation. The Motley Fool recommends Absolute Software Corp and Qualcomm. The Motley Fool has a disclosure policy.

- Jitendra Parashar
1 Oversold Dividend Stock I’d Buy in December 2022

The year 2022 started with a sharp selloff in high-growth stocks as consistently rising inflation raised the possibility of aggressive interest rate hikes. However, many fundamentally strong dividend stocks have also seen a sharp correction in the last few months as rapidly rising interest rates made investors worried about a looming recession. If your main focus is on investing for the long term, such market corrections could be an opportunity for you to add some quality dividend stocks to your portfolio.

In this article, I’ll talk about one oversold dividend stock in Canada that you can consider buying in December 2022.

One oversold dividend stock to buy in December

Whether you’re investing for the short term or long term, you shouldn’t ignore the underlying fundamentals of a stock. This principle applies, even if you’re buying an oversold stock, as you still may want to trust only fundamentally strong businesses to invest your hard-earned money. Considering that, CI Financial (TSX:CIX) could be a reliable business to invest in for the long term. It looks undervalued to me right now.

This Toronto-headquartered global asset and wealth management firm has a resilient revenue base and strong profit margins. The company currently has a market cap of $2.6 billion after its stock has seen 47.4% value erosion in 2022 so far to trade at $13.92 per share. CI Financial distributes its dividend payouts on a quarterly basis and has an attractive yield of around 5.2% at the time of writing.

Top reasons to buy this Canadian dividend stock now

In the five years between 2016 and 2021, CI Financial’s total revenue rose by 40% from $1.9 billion to $2.7 billion. During the same period, its adjusted earnings grew positively by a solid 61% from $1.96 per share to $3.15 per share.

As macroeconomic uncertainties have led to market turmoil this year, asset and wealth management businesses, including CI Financial, have faced difficulties. This is one of the key reasons why CI’s September quarter adjusted earnings fell by 7.6% year over year to $0.73 per share after consistently growing positively in the previous eight quarters. However, the ongoing temporary challenges aren’t likely to majorly affect its long-term growth prospects, as its financial position continues to be strong with the help of its growing asset base.

At the end of October 2022, CI Financial had total assets of $364.3 billion. And the company continues to expand its asset base further by making new quality acquisitions. For example, it recently made two acquisitions in the United States, including the Boston-based Eaton Vance WaterOak Advisors and the New York-based investment advisory firm Inverness Counsel.

Besides these acquisitions, CI Financial is also trying to modernize its asset management business, expand its wealth management platform, and increase its global presence. Considering all these positive factors, I find CI Financial stock highly undervalued at the moment when it’s down more than 47% this year. Given that, you may consider adding this fundamentally strong Canadian dividend stock to your portfolio before it’s too late.

The post 1 Oversold Dividend Stock I’d Buy in December 2022 appeared first on The Motley Fool Canada.

Should You Invest $1,000 In Ci Financial Corp?

Before you consider Ci Financial Corp, you’ll want to hear this.

Our market-beating analyst team just revealed what they believe are the 5 best stocks for investors to buy in November 2022 … and Ci Financial Corp wasn’t on the list.

The online investing service they’ve run for nearly a decade, Motley Fool Stock Advisor Canada, is beating the TSX by 15 percentage points. And right now, they think there are 5 stocks that are better buys.

See the 5 Stocks
* Returns as of 11/4/22

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Retirees: 3 Canadian Stocks You Can Confidently Own for the Next 20 Years Should You Invest in Absolute Software Stock Right Now? FOR TUESDAY – 3 TSX Stocks to Buy Today and Hold for the Next 3 Years Is Dollarama Stock a Buy at All-Time Highs? Should You Buy Shopify Stock If the Rate Hike Cycle Slows?

The Motley Fool recommends CI FINANCIAL CORP. The Motley Fool has a disclosure policy. Fool contributor Jitendra Parashar has no position in any of the stocks mentioned.

- Rajiv Nanjapla

Along with rising inflation and higher interest rates, the ongoing protests in China against its tighter COVID-19 policies have created volatility in the equity markets. However, investors with over three years of investment horizon can go long on quality stocks with healthy growth potential. Meanwhile, here are my three top TSX picks.

WELL Health Technologies

The telehealthcare market is expanding with technological advancements and internet service penetration. Besides, its accessibility and cost-effectiveness have increased the service’s popularity among patients. Meanwhile, Transparency Market Research projects the telehealthcare market to increase at a CAGR (compounded annual growth rate) of 14% from 2019 to 2027. So, amid the expanding addressable market, I have picked WELL Health Technologies (TSX:WELL), a Canadian telehealthcare company, as my first choice.

The company has continued its uptrend, with its third-quarter revenue and adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) growing by 47% and 23%, respectively. Solid organic growth and strategic acquisitions drove its financials. Supported by its impressive third-quarter performance, the company’s management increased its 2022 revenue target by $15 million to $565 million. Besides, the management is hopeful of reaching a revenue run rate of $700 million by the end of 2023.

However, amid the recent selloff, WELL Health has lost around half its stock value compared to its 52-week high. So, given its healthy growth prospects and discounted stock price, I expect the company’s stock price to double over the next three years.

Suncor Energy

Suncor Energy (TSX:SU), which has outperformed the broader equity markets this year by delivering impressive returns of over 45%, would be my second pick. Higher commodity prices and its outstanding quarterly performances have increased its stock price. In the September-ending quarter, the company’s adjusted funds from operations grew by 69% to $4.47 billion.

Meanwhile, the company has continued its growth initiatives by signing an agreement to acquire a 21.3% stake in Teck Resources’s Fort Hills facility for $1 billion. This acquisition could raise Suncor Energy’s stake to 75.4%. Besides, analysts are bullish on oil. They expect the ending of COVID-induced restrictions in China to drive oil prices higher next year. So, higher oil prices and growth initiatives could boost the company’s financials in the coming years.

Besides, Suncor Energy has raised its quarterly dividend by 11% to $0.52/share, with its yield currently at 4.5%. It also trades a healthy price-to-earnings multiple of 5.9, making it an attractive buy.

Waste Connections

I am choosing Waste Connections (TSX:WCN) as my final pick, given the essential nature of its business and healthy growth prospects. The waste management has continued to drive its financials, with its revenue and adjusted EBITDA growing at 18.2% and 16.4%, respectively. Higher pricing, exploration and production activities growth, and strategic acquisition have driven the company’s financials during the quarter.

As of November 2, the company has completed acquisitions that can raise its revenue by $570 million annually. Besides, the company is working on closing several other acquisitions that can boost its annual revenue by $35 million. Further, the company’s management expects its revenue to grow in double-digits next year amid its market expansion, higher prices, and increasing exploration and production activities. Meanwhile, it raised its quarterly dividend earlier this month by 10.9% to US$0.255/share. So, considering all these factors, I expect Waste Connections to outperform the broader equity markets over the next three years.

The post FOR TUESDAY – 3 TSX Stocks to Buy Today and Hold for the Next 3 Years appeared first on The Motley Fool Canada.

Should You Invest $1,000 In Suncor Energy?

Before you consider Suncor Energy, you’ll want to hear this.

Our market-beating analyst team just revealed what they believe are the 5 best stocks for investors to buy in November 2022 … and Suncor Energy wasn’t on the list.

The online investing service they’ve run for nearly a decade, Motley Fool Stock Advisor Canada, is beating the TSX by 15 percentage points. And right now, they think there are 5 stocks that are better buys.

See the 5 Stocks
* Returns as of 11/4/22

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Top Stocks for New TFSA Investors Suncor Energy Stock: Should You Buy the Dip? 3 Healthcare Stocks to Buy for Long-Term Passive Income Here’s Why I Just Bought WELL Health Stock 3 Growth Stocks That Look Ready to Double in 1 Year

Fool contributor Rajiv Nanjapla has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

- Amy Legate-Wolfe
Is Dollarama Stock a Buy at All-Time Highs?

Supermarket aisle with empty green shopping cart

Dollarama (TSX:DOL) has been one of the top performers in 2022. And that’s saying a lot. While other companies, including many retail stocks, are seeing shares drop into oblivion, Dollarama stock remains upward. In fact, it continues to surpass all-time highs.

But does this mean Dollarama stock is due for a drop? Or is this a defensive play perfect for your portfolio? Today, we’re going to see if Dollarama stock remains a buy on the TSX today.

Analysts weigh in

We’re still waiting on third-quarter earnings from Dollarama stock, and already analysts are weighing in on expectations. And what analysts really like is that other similar stores are doing so well. This includes Walmart, which recently saw incredibly strong same-store sales growth in Canada. In fact, over the last few quarters, Dollarama stock has outperformed compared with Walmart.

The point here is that consumers are looking to cheaper areas to make purchases and fight back inflation. In particular, it’s not just the holiday season that investors should look to when it comes to spending. Halloween and back to school will also be high notes for Dollarama stock and its Q3 report.

The company has a strong track record of growth, and during a recession and even poor economy the stock continues to do well. Because of this, analysts believe it’s a strong defensive stock to keep in your portfolio.

Growth should continue

Analysts also believe that same-store sales growth will continue not just for the next quarter, but for full-year 2023 at least. Again, this is pointing to the potential of a recession. This will allow the company to continue its domination of the low-cost retail space.

Not only will Dollarama stock then see more stores increase its growth trajectory, but this will allow it to bring in more superior products. There has already been an increase in more well-known brands over the last few years, which has driven more Canadians who want to keep more cash in their wallets to its aisles. And you really do save, with products offering a discount of up to 50% to 60% compared with comparable products, according to a recent analysis.

Great protection, but is it a buy?

So right now, yes, Dollarama stock does seem like a buy during this down market. It’s acted like a cyclical stock before, doing well in a recession as Canadians look to save money. It certainly offers protection as inflation and interest rates rise. However, what about the long term?

Analysts remain impressed by the growth in stores, as well as sales, and from opportunities abroad. This includes in Latin America. Dollarama stock, therefore, seems to be using its cash from its growing operations effectively, and it looks like a solid long-term hold.

I do, however, stress “long term.” It’s hard to tell what the future holds, especially during a recession. Dollarama stock isn’t immune to drops, and it has yet to go through a major recession. So time will tell how it performs in the next year, and those to come.

Shares of Dollarama stock are up 31% year to date, trading at 33.1 times earnings as of writing.

The post Is Dollarama Stock a Buy at All-Time Highs? appeared first on The Motley Fool Canada.

Should You Invest $1,000 In Dollarama?

Before you consider Dollarama, you’ll want to hear this.

Our market-beating analyst team just revealed what they believe are the 5 best stocks for investors to buy in November 2022 … and Dollarama wasn’t on the list.

The online investing service they’ve run for nearly a decade, Motley Fool Stock Advisor Canada, is beating the TSX by 15 percentage points. And right now, they think there are 5 stocks that are better buys.

See the 5 Stocks
* Returns as of 11/4/22

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3 TSX Stocks That Could Continue to Beat the Market 3 Canadian Giants That Could Outperform Markets in 2023 5 Things to Know about the Dollarama Stock in November 2022 3 TSX Stocks to Buy No Matter What the Market Is Doing 3 Canadian Gems to Buy Amid Rising Interest Rates

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

- Vineet Kulkarni
Should You Buy Shopify Stock If the Rate Hike Cycle Slows?

Online shopping

Canadian e-commerce giant Shopify (TSX:SHOP) was an amazing growth story till last year. But not anymore! It has lost 72% of its market value this year and is one of the biggest wealth destructors of 2022. However, the recent inflation data did bring some respite, driving a modest 40% recovery since last month. But the stock is still way down from its all-time highs. So, should you buy SHOP at current levels?

Bull case

If inflation cools down and interest rate hikes slow, that could cheer tech investors. Rapidly rising rates have already done enough damage, and we might have seen growth stocks bottom recently. So, the central bank’s policy shift will likely please growth investors.

Moreover, Shopify saw decent 22% revenue growth year over year in Q3 2022. It also reported narrower-than-expected losses for the quarter. And as it is investing in growth projects like the Fulfillment network, the financials could take a hit in the short term to brighten the long term. Shopify’s Fulfilment network could be a key growth driver, especially after its acquisition of Deliverr.

Shopify was a saviour when it helped merchants set up an online store during the pandemic. However, growth waned amid normalcy as customers went back to brick-and-mortar stores. Interestingly, Shopify is now catering to offline merchants, making itself an “all-in-one” solution for commerce. Its new point-of-sales Pro software enabled for Android devices saw solid traction in the recently reported quarter.

Shopify caters to an enormous addressable market, including both online and offline merchants, and operates in over 150 countries. As e-commerce will likely continue to grow, its gross merchandise volume and financial growth could follow.

Bear case

Although Shopify saw decent topline growth recently, it is much lower than the historical average of close to 60%. Its margins also took a notable hit this year amid higher costs.

Even if the rate hike slows next year, inflationary pressures will likely remain, negatively impacting its bottom line. In the last 12 months, Shopify has reported total losses of US$3.2 billion against a net profit of US$3.4 billion in the earlier period.

After such a steep value erosion, SHOP stock is currently trading at eight times its sales. That’s a deep discount, making it vulnerable to upcoming interest rate hikes.

Shopify is aggressively investing in its crucial Fulfillment network project. So, we might continue to see cash burn for the next few quarters. Moreover, how the project turns out and whether it will really be a growth driver remains to be seen.

Conclusion

Shopify stands at a crucial juncture where it seems to be beginning a new growth chapter. The stock could continue to trade within a range, given the supply chain issues and ensuing inflation pressures. The digital commerce solutions provider does not seem ready to catch a full-fledged recovery just yet due to the absence of any significant growth drivers.

The risk-reward proposition appears out of favour, given its slackening financial growth. Though investors would be prudent to check again on SHOP after a couple of quarters, in expectation of more certainty over its profitability and easing inflation woes.

The post Should You Buy Shopify Stock If the Rate Hike Cycle Slows? appeared first on The Motley Fool Canada.

Should You Invest $1,000 In Shopify?

Before you consider Shopify, you’ll want to hear this.

Our market-beating analyst team just revealed what they believe are the 5 best stocks for investors to buy in November 2022 … and Shopify wasn’t on the list.

The online investing service they’ve run for nearly a decade, Motley Fool Stock Advisor Canada, is beating the TSX by 15 percentage points. And right now, they think there are 5 stocks that are better buys.

See the 5 Stocks
* Returns as of 11/4/22

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4 TSX Growth Stocks to Buy and Hold Forever Shopify Stock Soars as Tech Stock Breaks Another Black Friday Record 2 Fallen TSX Market Darlings That are Beyond Oversold The Best TSX Stocks to Invest $3,000 in Right Now 4 Stocks I’d Buy Today and Hold Forever

Fool contributor Vineet Kulkarni has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Shopify. The Motley Fool has a disclosure policy.

- Joey Frenette
2 Canadian Stocks Set to Soar in a New Bull Market

A bull outlined against a field

A new bull market is never as far as you’d think in the heat of a bear market. Undoubtedly, this bear market has dragged on for quite a while. As it hits the 11-month mark, questions linger as to whether it’ll keep on weighing on broader markets or if a new bull is around the corner. Indeed, it’s been tough to trust any market rally in the hands of the bear.

We’ve seen some powerful bear market rallies be cut short, only to implode in a devastating fashion. Right now, we’re seeing markets really run out of steam, now that optimism following the cool U.S. consumer price index report has now been exhausted. Whether we’re headed back for the lows remains to be seen.

New bull market: Nobody knows when it’ll happen, but it may prove wise to buy before it roars

Despite the likely recession that’s getting closer each day and a still relatively hawkish central bank, I think it’s not unwise for long-term investors to look ahead to the next bull market. After the bear comes the bull. Even if this current bear market extends into the first or second quarter of 2023, the bear is getting a tad long in the tooth, at least historically speaking.

Now, I have no idea when the next bull market will run. Those who attempt to time it will probably be wrong. Though the current bear market is getting old, it’s still quite mild compared to those in the past. The S&P 500 sagged as low as 26%. That’s hardly the worst decline in the bear’s track record.

Still, if we’re in for a mild recession, stocks may be on their way to recovery in the new year. In any case, Canadian investors should focus on wonderful companies at cheap multiples. Currently, Spin Master (TSX:TOY) and Sleep Country Canada Holdings (TSX:ZZZ) look like great deals to check out on Cyber Monday week!

Spin Master

Spin Master is a Canadian toy company that’s wheeled and dealed at a rapid pace over the years. The company’s balance sheet has remained strong, leaving ample room to buy the dip in an ailing toy market. Recently, Spin made headlines for its purchase of puzzle firm 4D Brands. I think the deal complements Spin’s impressive roster well. Though many investors may be puzzled by the deal (sorry for the pun, folks!), I think it’s a wise move that could be one of many as valuations continue to contract across the board.

Undoubtedly, Spin’s merger and acquisition prowess and strong cash position will come in handy, as multiples continue to fall into a recession year. At just 8.92 times trailing price to earnings (P/E), TOY stock strikes me as real value in the mid-cap universe. The $3.5 billion mid-cap is too cheap with expectations quite low ahead of the holiday season. Sure, the holiday season may be less exciting this year. Nonetheless, seasonal strength is seasonal strength. And I think it could be enough to power Spin higher.

Sleep Country Canada Holdings

It’s easy to sleep on discretionary retail plays going into recession (again, sorry for the pun!). That said, Sleep Country looks to be priced as though the coming recession will be a really bad one. Though there’s always a chance of a severe 2008esque recession, I find it unlikely. The labour market is still strong, and there’s a good chance central banks can do away with inflation without crushing corporate earnings severely.

At 8.48 times trailing P/E, ZZZ stock is a heavily sold-off play that could outperform if there’s nothing to fear about the looming recession other than fear itself. Mattresses and sleep products will be in high demand again, whether it’s late next year or a few years down the road. If you’ve got a three-year horizon, I think the risk/reward scenario is spectacular.

The post 2 Canadian Stocks Set to Soar in a New Bull Market appeared first on The Motley Fool Canada.

Should You Invest $1,000 In Spin Master?

Before you consider Spin Master, you’ll want to hear this.

Our market-beating analyst team just revealed what they believe are the 5 best stocks for investors to buy in November 2022 … and Spin Master wasn’t on the list.

The online investing service they’ve run for nearly a decade, Motley Fool Stock Advisor Canada, is beating the TSX by 15 percentage points. And right now, they think there are 5 stocks that are better buys.

See the 5 Stocks
* Returns as of 11/4/22

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Fool contributor Joey Frenette has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Spin Master Corp. The Motley Fool has a disclosure policy.

- Kay Ng
Better Buy: Newmont or Barrick Gold Stock?

Gold bars

Gold stocks have generally been weak this year due to a stronger U.S. dollar that has weighed on gold prices. As a result, large-cap gold stocks Newmont (TSX:NGT) and Barrick Gold (TSX:ABX) have declined this year. Year to date, Newmont stock has corrected about 21%, while Barrick Gold stock has dropped roughly 11%. Let’s explore which may be a better buy today.

Past performance may be indicative of future performance

As you can see in the total return chart, gold stocks tend to move in tandem with each other. So, the one that has delivered greater returns may be a better buy. Newmont stock has delivered greater total returns over a multi-year period.

ABX Total Return Level Chart

ABX Total Return Level data by YCharts

When based on only price appreciation in the period, Newmont stock’s climb of about 41% also doubled that of Barrick Gold’s 20%.

Financial position

Newmont’s retained earnings are positive, which is always a good sign. As Investopedia explains, “Retained earnings are the cumulative net earnings or profits of a company after accounting for dividend payments… retained earnings decrease when a company either loses money or pays dividends and increase when new profits are created.” Specifically, the gold stock’s retained earnings were US$2.8 billion at the end of the third quarter (Q3).

Its debt-to-equity ratio is 84%, which is not that different from 82% in the “normalized” year of 2019.

In contrast, Barrick Gold has accumulated a deficit of almost US$6.3 billion. In other words, its retained earnings are in negative territory. However, the company’s capital structure has improved. The debt-to-equity ratio is 59%, down from 68% in 2019. The gold miner also earns an S&P credit rating of BBB+, which should instill confidence in investors.

Recent results

In Q3, Newmont realized an average gold price of US$1,691 per ounce, down 4.9%, while its all-in sustaining costs (AISC) for its gold operations increased by roughly 13% to US$1,271 per ounce. Accordingly, its adjusted EBITDA, a cash flow proxy, declined about 35% to US$850 million. Q3 cash flow from operations fell 59% to US$466 million, resulting in year-to-date free cash flow generation of US$703 million.

In Q3, Barrick Gold’s AISC for its gold operations was US$1,269 per ounce, up 23% year over year. Adjusted EBITDA declined about 31% to US$1,150 million. Its Q3 net cash provided by operating activities fell 28% to US$758 million, resulting in year-to-date free cash flow generation of US$528 million.

The Foolish investor takeaway

Both companies have witnessed a drop in profits lately due to inflationary pressures resulting in higher costs of operation and lower gold prices. It would be smart to limit your portfolio exposure to this sector.

That said, between the two, Barrick Gold stock appears to be a better value. The consensus analyst 12-month price target is US$53.60 for Newmont, which represents 18% near-term upside potential. At US$45.37 per share, its dividend yields 4.8% for additional returns. Barrick’s price target is US$20.40, which implies a 29% near-term upside is possible. At US$15.80 per share, its dividend yields 3.5%.

The post Better Buy: Newmont or Barrick Gold Stock? appeared first on The Motley Fool Canada.

Should You Invest $1,000 In Barrick Gold?

Before you consider Barrick Gold, you’ll want to hear this.

Our market-beating analyst team just revealed what they believe are the 5 best stocks for investors to buy in November 2022 … and Barrick Gold wasn’t on the list.

The online investing service they’ve run for nearly a decade, Motley Fool Stock Advisor Canada, is beating the TSX by 15 percentage points. And right now, they think there are 5 stocks that are better buys.

See the 5 Stocks
* Returns as of 11/4/22

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Gold’s Time to Shine? 2 Dividend Stocks to Play the Run Everyone is Talking About Barrick Gold Stock: Should You Buy? Should You Invest in TSX Mining Stocks Right Now? Millions of Investors Lose Money in Stocks: Don’t Be Them (Here’s How)  2 Commodity Stocks to Ride Out a Storm

Fool contributor Kay Ng has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

- Robin Brown
Algonquin Power Stock: Time to Buy or Buyer Beware?

Make a choice, path to success, sign

It has been a painful year for Algonquin Power and Utilities (TSX:AQN) stock. It is down 32% in the past month and 44.6% since the start of the year. Algonquin is a diversified utility and renewable power operator.

Utility stocks are generally considered very stable and dependable. So, it is pretty amazing for Algonquin stock to drop so precipitously.

Today, Algonquin stock has a huge dividend yield of 9.6%. While that may look very appetizing for income investors, you need to be cautious.

What happened to Algonquin stock?

On November 11, Algonquin announced third-quarter results that significantly disappointed investors. Revenues and adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) were up 26% and 10%, respectively, year over year. However, net earnings collapsed 600% and adjusted net earnings fell 25%.

Algonquin faced cost pressures due to increased operating costs, project delays, and, most significantly, rising interest rates. Algonquin revealed that 22% of its debt was variable rate. Fast-rising interest rates are having a significant impact on the bottom line.

In response, the company reduced its 2022 earnings guidance and noted that it is re-assessing its longer-term growth outlook. Algonquin has long touted its stock for its above-average growth plan (7-9% compounded annual earnings growth over the coming five years). The consideration that this may not be achievable caused the rapid selloff in the stock.

Why should investors be cautious with Algonquin’s stock?

Despite its attractive dividend yield today, the market is rating Algonquin stock with serious concern. The high yield is a signal alone to be very cautious. It is very rare that a stock with a high +9% dividend yield actually sustains its dividend over longer periods.

Algonquin has a lot of debt, even for a utility. Its net debt-to-adjusted EBITDA ratio is 8.4. For context, other pure-play utilities (like Fortis) are closer to 6.5. Interest rates are likely to continue to rise, so floating rate debt expenses will likely rise into the new year.

Likewise, Algonquin will be drawing on its variable rate credit facilities to pay for the anticipated Kentucky Power acquisition. It will also assume over $1 billion of debt in the transaction.

This fast-rising debt expense is quickly eating up earnings, leaving little room to pay the dividend, let alone grow it. Given its elevated financial and operational execution risk, income investors need to be very cautious of buying Algonquin stock.

Is Algonquin a buy here?

The one positive for Algonquin is that its stock is cheap today. After its swift decline, it trades with a huge yield, an enterprise value-to-EBITDA ratio of 10, and a price-to-earnings ratio of 10.6. This is significantly below peers.

The company does have a high-quality portfolio of regulated utilities and renewable projects that should do well in the long term. After the massive stock decline, Algonquin’s chief executive officer noted in a recent letter that he had purchased over $1 million worth of stock. This can often be a bullish signal.

The Foolish takeaway

Unfortunately, management’s actions are “too little and too late.” The company has sacrificed financial discretion and sustainability (a hallmark for utilities) for aggressive, yet-to-be accretive growth.

Given the uncertainty in the business, this is one dividend stock I would monitor but not buy today. The company needs to prove a prudent strategy for the future. Until then, investors should be cautious investing their hard-earned dollars into Algonquin stock.

The post Algonquin Power Stock: Time to Buy or Buyer Beware? appeared first on The Motley Fool Canada.

Should You Invest $1,000 In Algonquin Power and Utilities?

Before you consider Algonquin Power and Utilities, you’ll want to hear this.

Our market-beating analyst team just revealed what they believe are the 5 best stocks for investors to buy in November 2022 … and Algonquin Power and Utilities wasn’t on the list.

The online investing service they’ve run for nearly a decade, Motley Fool Stock Advisor Canada, is beating the TSX by 15 percentage points. And right now, they think there are 5 stocks that are better buys.

See the 5 Stocks
* Returns as of 11/4/22

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Fool contributor Robin Brown has no position in any of the stocks mentioned. The Motley Fool recommends FORTIS INC. The Motley Fool has a disclosure policy.

- Joey Frenette
Best Bank for Your Buck? 2 Top TSX Stocks to Buy Now

Two seniors float in a pool.

Canadian bank stocks are in a strange spot right now. They’re coming back from a bear market move over recession fears and a potential slowdown in loan growth. Indeed, the banks can be a choppy ride, even for the long-term investors who plan to stick it out year after year, collecting the dividend payments as they come due.

Through the past few years, it’s been quite a ride for the share prices of the top Canadian banks. Still, their dividends have come through. And if you scooped them up while they suffered steep plunges, you walked away having “locked in” a dividend yield that’s considerably higher than that of historical averages.

Canadian bank stocks: Top TSX stock picks for investors seeking dividends

Indeed, it’s tough to tell how the big bank stocks will fare going into 2023. The banks are economically sensitive, and they have been known to shed around 40-50% of their value during rough recessions. In the 2020 stock market crash, many bank stocks imploded, only to bounce back very quickly. If you acted in the very tiny window to pick them up at huge bargains, you scored a swollen (and safe) dividend that’s slated to keep on growing through the years.

Simply put, bank stocks can be tough buys when things go south. However, they’re worth the pain of hitting the buy button if you’re looking for stable and bountiful income that can last you a lifetime. Bank stocks are terrible trades, but they’re among the best dividend stocks to hold at the core of your TFSA or RRSP for the extremely long run. Perhaps bank stocks may not be the best plays to hold forever. But they are great if you seek the perfect mix of income and long-term capital appreciation.

Right now, the banks are trading at enticing discounts. Bank of Montreal (TSX:BMO) and CIBC (TSX:CM) look like the cheapest of the batch!

Bank of Montreal

Bank of Montreal stock has been facing the same pressures as its peers. At 7.8 times trailing price-to-earnings (P/E), I view the name as one of the best pick-ups from this broader bank stock drop. With a growing presence in U.S. banking, the Bix Six Bank has strong growth prospects ahead.

Indeed, top Canadian banks need to tap into the U.S. (or international) market for next-level growth. With a below-average book of Canadian mortgages, I view BMO as a less-risky play for investors who fear a Canadian housing market implosion as a result of rising interest rates. Despite having less exposure to the domestic housing market, BMO is still at risk of seeing loan growth tank in a recession. Fortunately, I think most of such pressure is baked into shares right now.

Further, this North American bank has really made major strides with its passive-investing line-up. Recently, BMO brought on Cathie Wood’s ARK line of funds to its roster. With innovation stocks down and out, I think BMO is smart to bring on Wood and her still-popular line of funds.

CIBC

CIBC is another enticing bank stock that’s on my radar after its slip. The stock trades at 9.2 times trailing P/E, with a swollen 5.2% dividend yield.

Indeed, CIBC has a fair amount of domestic mortgages on its book that could face pressure next year. However, the Big Sixer isn’t the same at-risk bank it was before the 2008 market crash. The bank has new managers in place and is likelier to fall on its feet once the 2023 recession works its course.

For that reason, I think CIBC stock is too cheap, as a result of too much negative sentiment weighing it down.

The post Best Bank for Your Buck? 2 Top TSX Stocks to Buy Now appeared first on The Motley Fool Canada.

Should You Invest $1,000 In Bank of Montreal?

Before you consider Bank of Montreal, you’ll want to hear this.

Our market-beating analyst team just revealed what they believe are the 5 best stocks for investors to buy in November 2022 … and Bank of Montreal wasn’t on the list.

The online investing service they’ve run for nearly a decade, Motley Fool Stock Advisor Canada, is beating the TSX by 15 percentage points. And right now, they think there are 5 stocks that are better buys.

See the 5 Stocks
* Returns as of 11/4/22

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Fool contributor Joey Frenette has positions in BANK OF MONTREAL. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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