The annualized return of approximately 16% far exceeds the 10-year market average of approximately 12%, and last year alone delivered a total return of almost 30%. When returns come so easily, experienced investors know it’s time to be selective.
Instead of chasing momentum, the smarter approach today is to lean on valuation discipline and reliable earnings. With the market yielding around 2.5%, investors should demand more, especially from companies facing uncertainty.
Pursuing returns of 4% or higher, combined with solid fundamentals, can help protect capital while still providing upside potential. Against that backdrop, two TSX-listed stocks appear to offer relatively attractive opportunities at the moment.
A defensive energy leader with an attractive income
Canadian natural resources (TSX:CNQ) is a textbook example of how scale, discipline and shareholder focus can create long-term value. As one of Canada’s largest oil and gas producers, CNQ has built a reputation for returning capital through both dividends and share buybacks.
The company has increased its dividend for 24 years in a row and boasts a remarkable 20-year dividend growth rate of 20.7%. Even more impressive, dividend growth has accelerated to around 23% over the past five years. That consistency is no coincidence. Canadian Natural Resources maintains a strong balance sheet, invests only in high-return projects and manages a diversified asset base with long reserve lives and low decline rates.
Operational efficiency is another advantage. With low maintenance capital requirements and a break-even oil price of low to mid-$40s per barrel, CNQ can remain profitable even during commodity downturns. Despite these strengths, the stock has largely moved sideways over the past year, missing much of the broader market rally.
At about $45 per share, CNQ offers a dividend yield of about 5.2%. Analysts also see meaningful upside potential, with consensus price targets implying a discount of around 14% and near-term upside potential of around 16%. For income-oriented investors, this energy stock seems like a good idea.
A beaten growth stock with a high return
On the other side of the spectrum easy (TSX:GSY), a non-prime consumer lender known for its volatility – and its long-term wealth creation. The stock has fallen about 20% in the past year, reflecting investor concerns about credit risk and economic uncertainty. However, volatility has always been part of goeasy’s story.
Management understands the risk profile and manages this asset, expecting net depreciation rates of approximately 8.75% to 9.75%. Historically, the growth strategy has paid off. Over the past ten years, goeasy has increased diluted earnings per share more than eleven times, which translates into a compound annual growth rate of more than 27%. A $10,000 investment ten years ago would be worth almost $93,000 today.
Today’s pullback offers a rare entry point. At around $131 per share, the stock is trading about 32% below its long-term average valuation, indicating potential upside of nearly 48% if sentiment improves and valuation normalizes.
Importantly for defensive investors, goeasy is also a Canadian Dividend Aristocrat. The dividend has grown at an annualized rate of 30% over the past decade, and the recent sell-off has brought the yield to around 4.4% – almost double the ten-year average of 2.3%.
For investors willing to tolerate risk and volatility, goeasy’s combination of revenue, growth and valuation makes it one of the most intriguing opportunities on the TSX today.
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