Forget Air Canada (TSX:AC): Instead Buy These 2 Canadian Stocks Under $30

Don’t be fooled by Air Canada’s (TSX:AC) speculative stock price rally. Instead, buy these stocks with good fundamentals and growth potential.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

So, you are thinking of buying Air Canada (TSX:AC) because it soared more than 30% in the last 40 days. Don’t make this mistake. AC is not a stock to buy when it rises, as it cannot sustain the rally for multiple reasons. It reported a $4.6 billion in net loss and $5 billion in net debt in 2020. And this doesn’t end here. The airline is burning $15-$17 million cash daily, which means another billion-dollar loss in the first quarter. If the under-$30 stock price is attracting you to AC, there are much better Canadian stocks with lower risks.

Two Canadian stocks much better than Air Canada

Warren Buffett bid farewell to airline stocks and welcomed stocks where there is demand. You don’t need to be a math genius to understand the Buffett logic. He doesn’t use any complex algorithms to choose the stocks. He reads the annual report, where the company states risks and opportunities. He then looks at the company’s cash flows, the demand environment, and whether the two factors will grow in the coming 10 years. He then invests accordingly.

To put it in layman’s terms, when selecting a stock, see whether the company is making money and sharing its profits with its shareholders. With AC, all the above metrics are negative. There is air travel demand, but the travel restrictions have left planes empty. I already talked about the cash-burning situation. Hence, Buffett is staying away from airlines. He is instead investing in oil and telecom.

Here are two Canadian stocks under $30 that have better cash flows and demand than Air Canada.

Suncor Energy 

Suncor Energy (TSX:SU)(NYSE:SU) stock is trading at $21.23 and has a dividend yield of 3.13% as of this writing. It is Canada’s largest integrated oil company. It was hit during the pandemic, as the lockdown reduced air and road travel where oil is majorly used as jet fuel, gasoline, and diesel. The sudden dip in oil demand impacted oil prices. Suncor’s average WTI crude oil price fell 30% from US$57.05 in 2019 to US$39.4 in 2020. This price dip pushed its free funds to flow to -$228 million in 2020 compared to $4.9 billion in 2019.

In the light of the pandemic, Suncor made several cost cuts and halved its dividend to sustain the reduced oil price. These cuts will increase profits and cash flows, as oil price and volume rise. The oil price has recovered partially from the pandemic peak, and experts believe oil demand will return to the pre-pandemic level by 2022.

When the oil demand recovers, Suncor could increase its dividend per share at an accelerated rate. Its stock also has room to grow another 50% if it recovers to the pre-pandemic level. A brighter future makes it a good buy at present.

But Suncor investment is not without risk. As oil is an essential commodity, Suncor cannot control its price. Economic activities impact oil demand and prices. Moreover, governments worldwide are pushing for cleaner energy. This shift in the energy sector will take years to come. Until then, their oil stocks will continue to give returns.

Telus stock

Similar is the case with Telus (TSX:T)(NYSE:TU) stock, which is trading at $25.85 and has a dividend yield of 4.82% as of this writing. The second-largest telecom operator in Canada saw accelerated revenue growth as the pandemic and 5G kicked in. As people moved online, there was increased usage of the internet. Telus’s annual revenue growth increased to 5.5% in 2020 from 2% in 2019. The accelerated revenue growth increased its free cash flow by 54% to $1.45 billion. Hence, Telus increased its 2021 dividend by 6.8%.

The Wall Street analysts expect revenue growth of over 8% in 2021, which means higher cash flow. It has been paying incremental dividends for the last 16 years at an average annual rate of over 11%. The 5G wave will drive its demand, cash flows, and dividends in the coming years.

Should you invest $1,000 in Teladoc Health right now?

Before you buy stock in Teladoc Health, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Teladoc Health wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $21,345.77!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 24 percentage points since 2013*.

See the Top Stocks * Returns as of 4/21/25

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 Puja Tayal has no position in any of the stocks mentioned. The Motley Fool recommends TELUS CORPORATION.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Dividend Stocks

senior relaxes in hammock with e-book
Dividend Stocks

How I’d Invest $8,200 in Canadian Monthly Dividend Stocks to Pay for My Retirement Lifestyle

If you have some cash on hand, then these monthly dividend stocks can provide you with cash for life.

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

Here’s Exactly How $20,000 in a TFSA Could Grow to $300,000

Can you grow $20,000 into $300,000 by holding the iShares S&P/TSX Index Fund (TSX:XIC) in a TFSA?

Read more »

ETF stands for Exchange Traded Fund
Dividend Stocks

How to Use $15,000 in a High-Yield Dividend ETF for Steady Passive Income

This ETF has it all, a strong portfolio of dividend payers, along with a high yield for investors.

Read more »

Person holds banknotes of Canadian dollars
Dividend Stocks

A 9.9 Percent Dividend Stock Paying Cash Every Month

If you are looking to park your money for the short term and earn from it, this 9.9% dividend stock…

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

Have Room in Your TFSA? 1 Canadian Dividend Champion for April Investors

If you've got extra cash in your TFSA, the latest dip in markets may provide you with a golden opportunity…

Read more »

engineer at wind farm
Dividend Stocks

Beginner Investors: How I’d Allocate $5,000 in 2 Safe Dividend Stocks

There are plenty of great dividend stocks on the market, but these two are buy-and-forget candidates that will boost your…

Read more »

grow money, wealth build
Dividend Stocks

Invest $25,000 in These 3 Dividend Stocks for $1,600 in Annual Income

These three Canadian dividend stocks could deliver a reliable passive income of over $1,600 annually.

Read more »

Woman in private jet airplane
Dividend Stocks

Why I’d Start My Investing Journey With $7,000 in 4 Foundational Stocks

These four stocks have high-quality and reliable operations, making them among the best long-term investments in Canada.

Read more »