AQN:CC - Beginner Investors: 2 Industry Giants to Buy and Hold Forever
2023-03-08 14:00:00 ET
When new to stock market investing , you might feel tempted to seek high-growth stocks for quick wealth growth through capital gains. As attractive as high-growth stocks can be, they are also risky. While stock market investing is inherently risky, higher-growth stocks pose a greater capital risk.
Investing in growth stocks is not a bad idea, but having a well-balanced portfolio to offset potential losses and protect your investment capital is better.
Beginner investors might be better off building the foundations of a well-balanced, self-directed portfolio by initially prioritizing dividend stocks that pay shareholders reliably. A company paying its shareholders dividends pays out a portion of its profits. When the underlying company has a defensive business model, it can continue disbursing shareholder dividends, even during economic downturns.
Identifying and investing in high-quality dividend stocks can be an excellent way to build a strong investment portfolio as a beginner. To this end, I will discuss two industry giants you can consider adding to your portfolio.
Rogers Sugar
Rogers Sugar ( TSX:RSI ) is a $644.86 million market capitalization company. The Vancouver-based company is a giant in the consumer staples sector as Canada’s largest refined sugar distributor. Since it produces an essential product, there is always a demand for its business, allowing Rogers Sugar stock to generate cash flow, regardless of broader market conditions.
Since consumer staples rely on volumes, keeping pricing competitive to keep the market share, investing in industry leaders is a safer bet. Rogers Sugar is the largest refined sugar supplier in the country, refining, packaging, and distributing sugar products in Canada, the U.S., and multiple markets in Europe.
The company plans to invest $160 million to expand its production capacity by 100,000 metric tons to bolster its output volume. As of this writing, Rogers Sugar stock trades for $6.18 per share and pays its shareholders a juicy 5.83% dividend yield.
Algonquin Power & Utilities
Algonquin Power & Utilities ( TSX:AQN ) is a $7.09 billion market capitalization regulated utility conglomerate that also has extensive renewable energy operations.
Utility stocks are typically considered boring stocks, because they do not show too much price appreciation on the stock market during upticks in the broader economy. However, that same quality makes utility stocks attractive investments during volatile market conditions.
Providing an essential service, utility stocks like Algonquin Power & Utilities can continue generating income when many other companies might suffer during downturns. With its growing renewable energy segment, Algonquin is also positioning itself for a stronger future aligning with the shift to green energy. However, Algonquin stock is not a stock to buy with blindfolds on.
Utility businesses rely on taking on heavy debt loads. With the aggressive interest rate hikes to control inflation, borrowing costs have gone up. Due to its debt load, cash retention became an issue. Algonquin stock’s management understandably slashed its 2023 dividends by 40%.
Unless the interest rate hikes stop, Algonquin might remain a riskier investment to consider. As of this writing, it trades for $10.53 per share and boasts an alarmingly high 9.30% dividend yield.
Foolish takeaway
Even when the underlying business is strong, it is essential not to forget that stock market investing is inherently risky. When you decide to invest your money in the stock market, considering all the risks, it pays to be careful about how much you allocate to investments in the market.
Of the two we discussed, Algonquin stock appears to be the riskier investment in the current market environment. Easing monetary policies can lead to a turnaround for Algonquin stock, but it can be considered riskier than some other utility stocks in the market. Since Rogers Sugars stock deals with consumer staples, it may be a safer investment than Algonquin stock right now.
The post Beginner Investors: 2 Industry Giants to Buy and Hold Forever appeared first on The Motley Fool Canada .
Fool contributor Adam Othman 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 .
2023