3 Canadian Stocks To Buy For 2021

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To say that 2020 has been a volatile year for stocks would be an understatement. There are stocks that have ‘zoom’ed up, a few that have crashed, and some that are in recovery mode. COVID-19 vaccines are getting rolled out, BP has said that oil demand may never recover to pre-pandemic levels, and the green shoots of recovery are starting to sprout. 

When investors look at 2021, they need to look at stocks that combine the dual advantages of capital appreciation and stability. Here are three stocks that we recommend:

Energy King: Enbridge

Enbridge (ENB) is a stock that ticks all three boxes required by investors to invest in a stock. It has great growth potential, it pays a very good dividend, and it has one of the best track records when it comes to revenues.

Enbridge is an $87.16 billion (market cap) energy infrastructure company. It is a midstream company, moving about 25% of the crude oil produced in North America, transporting nearly 20% of the natural gas consumed in the U.S., and operating North America’s third-largest natural gas utility by consumer count.

The company generates stable cash flows thanks to long-term contracts and regulated operations. Around 98% of Enbridge’s revenues are regulated, and the company has said that it is aiming for a range of $4.5-$4.8 per share for distributable cash flow (DCF). It is on track to hit $4.6 by the end of the year and expects to grow its DCF by 5-7% until 2022.

Enbridge also sports an attractive 7.7% dividend yield. The company has grown its dividend yield at a CAGR (compounded annual growth rate) of over 11% from 1995-2020. Shareholder return from 1995-2019 has been 15.8% compared to 10.6% on the S&P 500 and 8.9% on the TSX. Enbridge is one of the few companies on the TSX that didn’t cut or suspend its dividend payouts in 2020.

The company already has new oil and gas pipelines and gas utility expansions lined up. While the company is heavily reliant on fossil fuels, it has also invested $8 billion into renewable energy since 2002. It has an extensive project backlog lined up including offshore wind farms in Europe. Enbridge shares have recently been trading around $42.98, and analysts have given it a target of $50.55, an upside of over 17%. When you include the dividend yield, you can generate a return of around 25% in a year.

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