T:CC - 3 No-Brainer Stocks to Buy Under $50
2024-06-24 16:40:00 ET
There are many ways to make money by investing in stocks. However, building a portfolio has one tried-and-tested methodology. When you plan your investments, have a core portfolio where you invest in relatively safe stocks for the long term. This core portfolio can be used for emergencies, retirement, or major financial crises. You can use a Tax-Free Savings Account ( TFSA ) for your core portfolio, as it allows tax-free withdrawals.
Three no-brainer stocks under $50 for your core portfolio
The core portfolio is like your safe space where you can invest without stress. The stocks you buy in this portfolio should be ones you have confidence in. They are the no-brainers you can invest any time, even if you have as little as $50.
Telus stock
Telus ( TSX:T ) stock is trading near its 52-week low as the telecom sector undergoes restructuring. First, the 5G upgrade of the network infrastructure has increased the debt of all telcos. Second, the regulator is asking Telus to give competitors access to its network at discounted rates. And lastly, the 40-year-high interest rate and a slowing economy have slowed the business environment.
Despite the industry headwinds, Telus is holding out strong and has increased its dividend twice in 2024. At 91%, its payout ratio has exceeded its payout target of 75%. However, the company stated that the ratio will normalize as free cash flow increases with interest rate cuts and growth in subscription revenue. The company will continue to pay dividends for decades. You can invest in this stock anytime as it trades around $21/share and lock in a 7% yield and a 7% dividend-growth rate.
Enbridge stock
Enbridge ( TSX:ENB ) is a no-brainer stock as it has been paying dividends for over 69 years and will continue to pay them for another 10-20 years and more. Unlike Telus, Enbridge has maintained its payout ratio in the 60-70% target range. Enbridge has the biggest pipeline infrastructure, which is critical for Canada, which exports 99% of its oil and gas to the United States through these pipelines. This infrastructure is getting more relevant since North America became Europe’s liquified natural gas (LNG) supplier.
The company’s low-risk business model of earning revenue from toll money ensures it can increase its dividend by hiking toll rates, adding new pipelines, and expanding old ones. It plans to grow its dividend per share by 3% by 2026 as it channels the money to acquire American gas utilities. It plans to increase the dividend-growth rate to 5% from 2027 onwards. You can buy the stock whenever it trades below $50 and lock in a 7% yield.
OpenText stock
OpenText ( TSX:OTEX ) stock slipped almost 32% since February, with a sharp 17% dip on May 2 when the company released its third-quarter earnings . The information management company helps companies digitize their operations on the private cloud, ensuring a smooth flow of information.
The company has switched from mainframe server offerings to cloud offerings as the need of the hour is data on the go. It sold its cash-rich mainframe AMC business and used the US$2 billion proceeds to reduce its debt to US$6.5 billion and save US$154 million in annual interest. This debt reduction will reduce its net leverage ratio to less than 3% and increase its financial flexibility.
The AMC divestiture has reduced OpenText’s fiscal 2025 revenue and free cash flow. Investors have overreacted to this guidance as its mid-term guidance remains strong. The company plans to increase its adjusted earnings before interest, taxes, depreciation, and amortization margin from 32%-33% in fiscal 2025 to 36%-38% by fiscal 2027. The growing profit margin can help the stock give stable growth and a 3% dividend in the long term.
An investment hack
If you are having difficulty saving up money for your TFSA, you can adopt the savings jar method. Start putting $1 every day in a jar and increase it by $1 every week. In the second week, you will have a daily contribution of $2, which will grow to $52 by the end of the 52nd week. You can invest this money in any of the above stocks every Monday to avoid spending it.
By the end of 52 weeks, you would have invested $9,646. Remember, the TFSA contribution limit is only $7,000. You can continue your investment in another registered savings account.
The post 3 No-Brainer Stocks to Buy Under $50 appeared first on The Motley Fool Canada .
Fool contributor Puja Tayal has no position in any of the stocks mentioned. The Motley Fool recommends Enbridge and TELUS. The Motley Fool has a disclosure policy .
2024