2 Great Canadian Stocks to Buy Now and Hold Forever

Read why Barrick Gold (TSX:ABX)(NYSE:GOLD) plus one other great Canadian stock can reward shareholders for years to come.

| More on:

When uncertainty stalks the markets, only the strongest stocks will do. That’s why we’ve picked out two of the sturdiest names currently trading on the TSX. The following top stock picks are based on three main criteria. In order to make the cut, these two companies had to be well established, profitable, and undervalued. With over $1 billion in market capitalization apiece, both names are reasonably priced based on cash flows.

The solid gold stock choice

Barrick Gold (TSX:ABX)(NYSE:GOLD) is something of a one-stop stock for access to the yellow metal. Warren Buffett might have flip-flopped, but the buy thesis remains strong. As an explorer, developer, producer, and retailer, Barrick is involved at every step of the gold mining process. It also brings exposure to copper. This little-known fact makes Barrick a de facto low-exposure play for a range of growth industries.

To the classic low-risk play of a precious metals stock, investors can therefore add strategic capital gains potential. From renewables upside to electric vehicles access, copper exposure brings growth potential to a commodities portfolio. Such benefits also come at a fairly competitive price. Selling for $30 a share, though, Barrick has lost 20% since the end of summer. In short, this stock is a steal right now.

The Big Five banking stock

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) clocks in at the shallower end of the Big Five in terms of market cap. CIBC is nevertheless a world-leading, diversified, blue-chip financial, bringing access to a range of services and products. As such, it adds strategic benefits to the financials segment of a TSX stock portfolio. These include exposure to both institutional and public sector banking. And, of course, CIBC also counts commercial and business customers as clients.

Year on year, CIBC has seen only moderate share price growth. However, while value could also be slightly better, this is a very healthy stock with a low debt-to-equity ratio. A 5.2% dividend yield is still one of the richest among Bay Street financials. A payout ratio of 72% further assures shareholders that its distribution is secure. This coverage also offers long-term investors some potential for dividend growth.

A P/B ratio of 1.3 times book is fairly standard for a top Canadian bank. These names are slightly expensive, in large part because they are such high quality. Predictability is a commodity in itself in these uncertain times, though. Indeed, with a 36-month beta of 0.9, CIBC displays volatility somewhat lower than that of the market. This should be of note to investors with a low threshold for risk in their dividend stock portfolios.

In summary, Warren Buffett may have done gold investors a favour by making a U-turn on Barrick. Indeed, a general pullback in gold will only offer greater value opportunities in this must-have commodity. A 1.5% Barrick dividend yield remains rich. And the safe-haven status of gold is, as always, unassailable. Throw in the safety of a Big Five banker, and a Barrick-CIBC stock pairing could add years of passive income plus stability to a low-risk TSX stock portfolio.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Victoria Hetherington has no position in any of the stocks mentioned.

More on Dividend Stocks

Canadian Dollars bills
Dividend Stocks

3 Monthly-Paying Dividend Stocks to Boost Your Passive Income

Given their healthy cash flows and high yields, these three monthly-paying dividend stocks could boost your passive income.

Read more »

Make a choice, path to success, sign
Dividend Stocks

The TFSA Blueprint to Generate $3,695.48 in Yearly Passive Income

The blueprint to generate yearly passive income in a TFSA is to maximize the contribution limits.

Read more »

hand stacks coins
Dividend Stocks

3 Ultra-High-Yield Dividend Stocks You Can Buy and Hold for a Decade

These three high-yield dividend stocks still have some work to do, but each are in steady areas that are only…

Read more »

senior man and woman stretch their legs on yoga mats outside
Dividend Stocks

TFSA: 2 Canadian Stocks to Buy and Hold Forever

Here are 2 TFSA-worthy Canadian stocks. Which one is a good buy for your TFSA today?

Read more »

calculate and analyze stock
Dividend Stocks

This 5.5% Dividend Stock Pays Cash Every Single Month!

This REIT may offer monthly dividends, but don't forget about the potential returns in the growth industry its involved with.

Read more »

Silver coins fall into a piggy bank.
Dividend Stocks

How to Use Your TFSA to Earn up to $6,000 Per Year in Tax-Free Passive Income

A high return doesn't mean you have to make a high investment -- or a risky one -- especially with…

Read more »

path road success business
Dividend Stocks

2 High-Yield Dividend Stocks to Buy Hand Over Fist and 1 to Avoid

High yields are great and all, but only if returns come with them. And while two of these might, another…

Read more »

Man holds Canadian dollars in differing amounts
Dividend Stocks

This 7% Dividend Stock Pays Cash Every Month

A high dividend yield isn't everything. But when it pays out each month and offers this stability, it's worth considering!

Read more »