TD:CC - 3 No-Brainer Stocks to Buy With $20 Right Now
2024-05-21 21:15:00 ET
Gone are the days when you could only invest in stocks after you have saved up enough money to make your commission fee worthwhile. That’s because there are now commission-free trades available at Wealthsimple and National Bank of Canada .
There’s no excuse not to put your savings to work — however much you have saved up — even if it’s only $20. For example, if you’re able to save $20 a week towards your long-term investments, you would be investing $1,040 a year, which is a good start.
Let’s say you’re investing $20 a week, it would be a good idea to accumulate shares in stocks (driven by underlying businesses) that will grow their earnings, driving an increase in the value of the shares in the long run. You’d be employing a dollar-cost averaging strategy, in which you’re averaging your cost per share over time.
You can further increase the probability of your diversified portfolio increasing its value over time by putting your money in durable businesses that have high predictability in their earnings and pay out safe and growing dividends.
Here are three no-brainer stocks that are suitable for anyone getting started on their investing journey.
Fortis stock
Fortis ( TSX:FTS ) is a trustworthy blue-chip stock for investors to buy and hold. As one of the top Canadian utility stocks , it has increased its dividend for 50 consecutive years. Many retirees count on it for growing dividend income as a part of their diversified portfolios. Over the last 10 years, its dividend-growth rate was 6.3%.
The business is diversified across 10 regulated utilities in Canada, the United States, and the Caribbean. It consists primarily of transmission and distribution assets, serving 3.5 million electric and gas customers.
Currently, it has a $25 billion five-year capital plan through 2028 to grow its rate base at a compound annual growth rate (CAGR) of about 6%, which allows it to support healthy dividend growth of 4-6% per year in the period.
At $55.49 per share at writing, the utility stock is reasonably priced at a price-to-earnings (P/E) ratio of about 17.7 versus its long-term normal valuation of about 19.3 times earnings. At this quotation, Fortis also offers a decent dividend yield of 4.25%.
TD stock
Toronto-Dominion Bank ( TSX:TD ) stock also trades at a discount to its long-term normal valuation, as the stock has traded in a sideways range for a couple of years. The recent weakness in the Canadian bank stock was triggered by a money-laundering scandal. The stock bounced from the selloff, which suggests it was too cheap to ignore.
Certainly, for long-term investors, the bank stock offers good value. At $77.95 per share at writing, it trades at a P/E of about 10.1 and offers a nice dividend yield of 5.23%. As shown in the YCharts graph below, compared to its 10-year yield range, this is at the high end of the yield.
TD Dividend Yield data by YCharts
Rogers Communications stock
Rogers Communications ( TSX:RCI.B ) is another dividend stock that seems to offer good value. At $54.27 per share, it trades at a P/E of about 11.6. As one of the big Canadian telecom companies, its earnings are typically resilient through the economic cycle. It’s anticipated to experience stable earnings growth over the next few years. So, on a forward basis, it looks even cheaper.
Normally, it should be able to trade at about 15 times earnings, which represents a target price of over $70 per share. Indeed, analysts also have a 12-month price target of north of $70. Across 11 analysts, the consensus price target shown on the TMX Group website at the moment is $72.13. This represents a meaningful discount of approximately 25%. The stock also offers a safe dividend yield of close to 3.7%.
The post 3 No-Brainer Stocks to Buy With $20 Right Now appeared first on The Motley Fool Canada .
Fool contributor Kay Ng has positions in Fortis, Rogers Communications, and Toronto-Dominion Bank. The Motley Fool recommends Fortis, Rogers Communications, and TMX Group. The Motley Fool has a disclosure policy .
2024