The good news for Canadian investors is that the TSX is chock full of excellent growth and dividend stocks to buy. I usually focus on that. However, there are a few companies that I think investors might want to be more cautious about right now.
With that in mind, here are two buys and one sale (at least in my opinion).
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Buy: Toronto-Dominion Bank
As for the major Canadian bank stocks to buy, Toronto Dominion Bank (TSX:TD) shows up in my books as an excellent opportunity.
There are a number of important reasons for this. First, TD trades at a dirt-cheap price-to-earnings ratio of about 11 times, well below its banking peers. To me, this shows great value given that some of the regulatory headwinds have subsided.
Moreover, the company’s fundamentals remain very robust. Over twelve months, TD’s earnings per share (EPS) was $9.64, with a dividend yield of almost 4.1% and a payout ratio of less than 95%. I think this offers a sustainable advantage for those looking for both capital and dividend growth (given the bank’s 30-plus year track record of dividend increases).
As we see loan growth increase and net interest margins improve, there are plenty of catalysts that investors can use as reasons to buy this name now.
Buy: Fortis
Most investors who have read my work over the past few years are aware of my very optimistic view of the future Fortis (TSX:FTS).
Nothing has changed in this area.
This utility giant boasts a price-to-earnings ratio of 21 times. That’s very reasonable given its defensive profile and dividend yield of 3.3%, supported by decades of successive rate hikes.
With rising revenue over the past year (over $8.7 billion), bringing in net income of $1.25 billion and solid earnings per share and profit margin expansion, this is a stock I think investors looking to benefit from the rise of AI (and rising electricity consumption) may want to consider.
Sales: Constellation software
One of the best Canadian growth stocks that has bothered me lately (although I have been bullish in the past) is Constellation software (TSX:CSU).
That’s a shame, since the company’s scalable and replicable business model of acquiring small and mid-sized software companies over time has worked so well. But as most investors know, now is not the time to expand your portfolio with software investments (just look at the world of private credit).
With Constellation Software having given up most of its gains over the past three years, this is a stock that some consider relatively undervalued from a historical perspective. I’m actually inclined to agree. However, the reality is that investors are currently looking past software names, and the trend should be your friend.
That’s why I’m now changing my position on Constellation.
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