Canadian stocks are cheap, or dirt cheap as one of my recent Sunday Reads offered. Pessimism and risk can create lower stock prices. Another post recently noticed that Canada was slipping. Our productivity is nowhere to be seen. We don’t appear to have a national growth strategy beyond (much needed) immigration and buying some battery factory jobs. All said, we can buy Canadian stocks (and the stock market) that offer very solid earnings and very generous dividends. In this post we’ll look at a few stock portfolio ideas. We’re looking to Canadian stocks on the Sunday Reads.
Over one month ago I posted Canadian stocks are dirt cheap. The total yield on Canadian stocks was and is one of the most attractive in the world. We don’t always need robust growth to deliver solid total returns. Generous current earnings and modest growth can sometimes do the trick – and that tag team can provide a useful part of the portfolio.
The price to earnings ratio for the Vanguard VDY ETF is 12.3 according to the Vanguard Canada website. The yield is 4.7%. That post compares VDY to iShares XEI. XEI is sitting at a very attractive PE ratio of 11, thanks to increased exposure to Canadian oil and gas stocks.
The total Canadian stock market (XIC/TSX) is trading at 12.8 PE ratio according to iShares.
And perhaps, the best Canadian stock ETF for risk-adjusted returns might be BMO’s Low Volatility ETF (ZLB/TSX). The outperformance is over 3% annual.
The returns of the Canadian Wider Moat Portfolio are very similar to ZLB. It finds the same types of stocks and sectors. You can grab the Canadian market with one ticker, or you can build a simple stock portfolio. You might also build around the value-hunting Beat The TSX Portfolio.
Canadian stock portfolio ideas from Norman Rothery
Rothery offered a post on portfolios of interest to dividend and value investors. He has tracked and backtested several models for quite some time. All of the models have delivered outperformance vs the market.
Akin to the Canadian Wide Moat Portfolio, there’s the Low Volatility Dividend Portfolio. Financials, telcos, grocers, railways, utilities.
Here’s the Frugal Dividend Portfolio that offers cheap and stable dividend payers.
There are also bargains with free cash flow …
It is very easy to build a sensible Canadian stock portfolio, and you can certainly slant to value and generous dividends (if that’s your thing).
Belski’s Canadian picks
By way of Scott Barlow a the Globe and Mail …
Mr. Belski referred to his North American Dividend Growth Portfolio for income ideas. The outperform-rated Canadian companies on the list are BCE Inc., Telus Corp., Restaurant Brands International, TC Energy Corp., Brookfield Corp., National Bank of Canada, Canadian National Railway, Brookfield Infrastructure Corp. and Emera Inc.
It is interesting to see TC Energy on that list. This week I asked, should you run away from TC Energy and the Canadian pipelines.
U.S. stocks for consideration
Recently I offered some U.S stock ideas for 2023. In that post you’ll also find the returns of our personal U.S. portfolio – for that of my wife and me.
I looked to the U.S. stocks and the greater conviction list of 10 for 2023. In short order it has outperformed the S&P 500 that is driven by the magnificent 7.
That’s a surprising stat. Yes, it’s only 2 months, but it shows that one can generate very good returns without the ‘top stocks’ that are mostly at head-scratching valuations.
As always the stocks lists and posts are not advice – they are ideas for consideration.
And you don’t have to be a stock picking guru, you can simply buy the markets. One way is by way of the all-in-one asset allocation ETFs. More important than stocks vs ETFs is your savings rate and ability to add money on a regular schedule. Those are two of the main ingredients for incredible wealth creation over time.
I was gonna write a personal finance book but it only took about 1200 words 😉
Investors should certainly consider international diversification as well.
More Sunday Reads
Thanks to Mark at My Own Advisor for picking up my TC Energy post for his lead story on the weekend reads.
For the weekly market wrap we’ll start with Dividend Hawk. Earnings are still trickling in, and Hawk also has the blog posts of the week, including 20 recession proof stocks from Simply Safe Dividends. It’s interesting to see some energy stocks in the mix.
At Findependence Hub, how Alian Guillot (shockingly) lives on $24,000 per year.
It’s what they call Lean FIRE (Financial Independence Retire Early).
At MoneySense, Kyle Prevost makes sense of the week.
The positive-if-not-perfect direction of inflation from the last few months has led many to speculate the U.S. Fed may pause interest rate hikes in September, after its 11 hikes going back to March 2022. With American consumers racking up over $1 trillion in credit-card debt for the first time ever, the ability of domestic spending to keep powering the U.S. economy should begin to decline despite record-low unemployment.
On the earnings front Kyle shows how the Canadian insurers beat expectations.
Insurance earnings highlights
- Manulife Financial (MFC/TSX): Earnings per share of $0.83 (versus $0.77 predicted).
- Sun Life Financial (SLF/TSX): Earnings per share of $1.57 (versus $1.52 predicted).
- Great West Life (GWO/TSX): Earnings per share of $0.99 (versus $0.91 predicted).
- Power Corporation (POW/TSX): Earnings per share of $1.27 (versus $0.97 predicted)
You’ll find Power Corp and Manulife in the Beat The TSX Portfolio for 2023.
At The Retirement Manifesto (and to quote Willie Nelson) Fritz and his wife are on the road again. Time for some slow travel in the RV. Enjoy 🙂
For the Financial Post, Martin Pelletier has never seen such a disconnect between energy and non-energy markets. I continue to chip away at my oil and gas stocks and ETFs. In that Tweet/X you’ll see Martin’s oil and gas holdings.
Lending your shares at Wealthsimple Trade
I posted this on X and Dan at stocktrades.ca replied.
There is no risk. You’re lending your shares to someone to sell short. In reality, if it isn’t you, it’s just gonna be the next person. Not sure why anyone wouldn’t do it.Dan at stocktrades.ca
I’ll sign up for that. I have my TFSA at Wealthsimple. I will keep you posted.
And it’s nice to see some price discovery in Canadian real estate. More volume should bring on greater (and truer) price discovery, driven by affordability.
For the sake of new home buyers, let’s hope the trend continues.
If you’re in the market, don’t forget to open up that FHSA in 2023.
Bob at Tawcan offers his first half of 2023 portfolio review.
The idea is to have a mix of high yield low dividend growth and low yield high dividend growth stocks to generate sufficient dividend income for us to eventually live off dividends. We want our dividends to continue to grow organically when we slow down with new capital contribution.
Bob may also embrace the idea of selling shares to create significant additional income. For many of the lower yielders the bulk of the value is (trapped) within the share prices. We make homemade dividends.
Retirees will also need to manage sequence of returns risk with cash and GICs and bonds and defensive sector holdings.
There’s also a dividend/portfolio upate at GenYMoney.
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