2 Simple Canadian Stocks for Beginner Investors to Buy Now

These two popular Canadian businesses are two of the simplest and best Canadian stocks for new investors to buy in the current environment.

| More on:
Technology

Image source: Getty Images

One of the first rules of investing, something Warren Buffett has recommended, and what naturally makes sense, is that you should never buy a stock that you don’t understand. Whether you’re new to investing or have years of experience, you should only buy Canadian stocks you thoroughly understand.

If you struggle to articulate how your investment makes money, what the major risks the business has, or what the company has to do to overcome those risks and continue growing, how can you accurately put a value on the stock and decide it’s worth an investment?

The more you understand the entire business and its economics, the better a decision you can make on when to buy and when, if ever, you need to sell.

With that in mind, if you’re just starting out, some of the best Canadian stocks to buy will be stocks that are simple and easy to understand. Here are two of the best to consider this week.

Two of the best Canadian stocks to buy for new investors

If you’re looking for some of the best Canadian stocks to buy now that are easy to understand, Pizza Pizza Royalty (TSX:PZA) and Dollarama (TSX:DOL) are two I would suggest.

First off, both are well-known brands across Canada, but they also both have simple business models that are straightforward. And, most importantly, Pizza Pizza and Dollarama are two of the best Canadian stocks to buy now.

In Pizza Pizza’s case, the company earns a royalty on any sales that its Pizza Pizza and Pizza 73 locations do. This is crucial because even if a few restaurants are unprofitable for brief periods, as long as they are earning sales, the corporation is earning a royalty.

Therefore, because there are hundreds of locations across the country, Pizza Pizza typically sees little volatility in its sales year over year. In addition, because it has few costs, most of the cash it brings in goes directly to the bottom line.

So, with the stock aiming to keep its payout ratio around 100%, investors can tell well in advance if the dividend has the potential to be increased or even if it’s at risk of being trimmed. This makes it extremely simple to understand. And in this environment where reliable dividend stocks are in demand, it’s one of the best Canadian stocks to buy now.

Dollarama is a bit more complicated than Pizza Pizza, only because it has more costs and factors to deal with. However, the discount retailer is still a straightforward business. And in this environment, with sky-high inflation, it’s easy to see why a company like Dollarama has so much potential to see its sales continue to grow rapidly.

Consumers are looking for any way possible to offset higher prices, especially for essential goods they need to buy. Dollarama is well positioned in the current environment, making it one of the best Canadian stocks to buy now.

Should you buy Dollarama or Pizza Pizza for your portfolio?

Whether or not you should buy Pizza Pizza or Dollarama all depends on your portfolio, what you have exposure to, and what your goals are.

Because Pizza Pizza aims to pay essentially all of its net income back to investors, the dividend stock and its roughly 5.6% yield are suited for investors looking for predictable passive income. Dollarama, however, is one of the best Canadian growth stocks you can buy for the long haul.

It’s certainly possible for investors to buy both these high-quality companies. However, you should only do so if you’ve done adequate research and fully understand each of these businesses inside and out.

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 Daniel Da Costa has no position in any of the stocks mentioned. The Motley Fool owns and recommends PIZZA PIZZA ROYALTY CORP.

More on Stocks for Beginners

a man relaxes with his feet on a pile of books
Dividend Stocks

CPP Pensioners: Watch for These Important Updates

The CPP is an excellent tool for retirees, but be sure to stay on top of important updates like these.

Read more »

Piggy bank with word TFSA for tax-free savings accounts.
Stocks for Beginners

2 Top TSX Growth Stocks to Stash in a TFSA for Life

These two growth stocks may not be the top in the last month, but in the last few years, they…

Read more »

people relax on mountain ledge
Dividend Stocks

Invest $10,000 in This Dividend Stock for a Potential $4,781.70 in Total Returns

A dividend stock doesn't have to be risky, or without growth. And in the case of this one, the growth…

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

How to Turn a $15,000 TFSA Into $171,000

$15,000 may not seem like a lot, but over time that amount can balloon into serious cash.

Read more »

A worker uses a double monitor computer screen in an office.
Stocks for Beginners

Why I’d Buy Fairfax Financial Stock Even at Today’s Prices

Fairfax stock just keeps edging higher. But is it now too expensive, or can investors just look forward to even…

Read more »

Piggy bank in autumn leaves
Dividend Stocks

A 5.6% Dividend Yield? I’ll be Buying This TSX Stock for Decades!

This Big Six Bank offers a large dividend, growth strategy, and stability. In short, it offers it all!

Read more »

Concept of multiple streams of income
Stocks for Beginners

Lock Up This 9.2% Dividend Yield From a Top Royalty Stock

Royalty stocks have a strong advantage when it comes to creating passive income for investors. But this one has the…

Read more »

concept of real estate evaluation
Dividend Stocks

Buy 1,154 Shares of This Top Dividend Stock for $492.54/Month in Passive Income

This dividend stock can pay out top cash every month, sure, but has even more to look forward to.

Read more »