Should you invest $1,000 in Vanguard Ftse Canadian High Dividend Yield Index Etf right now?

Before you buy stock in Vanguard Ftse Canadian High Dividend Yield Index Etf, 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 Vanguard Ftse Canadian High Dividend Yield Index Etf 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 $21,058.57!*

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 38 percentage points since 2013*.

See the Top Stocks * Returns as of 2/20/25

2 Top TSX Stocks With Strong Balance Sheets and Tempting Valuations

Two TSX stocks with solid fundamentals.

| More on:

Image source: Getty Images

When investing for a longer term, fundamentals matter more than anything else. Returns are mainly driven by the earnings quality, balance sheet strength, and stock’s valuation. While news or events drive stocks in the short term, fundamentals prevail in the long term. So, here are two such TSX stocks with solid fundamentals.  

Canadian Natural Resources

Canada’s biggest crude oil producer Canadian Natural Resources (TSX:CNQ) is one compelling name in the TSX energy space. Its long-life, low-decline prolific reserves facilitate stellar cash flow growth in the current historically high-price environment. Its diversified product mix of heavy and light oil, along with natural gas, plays well for its top-line growth.

Created with Highcharts 11.4.3Canadian Natural Resources PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

CNQ has repaid billions of dollars in debt since the pandemic. Its leverage ratio has improved from close to 4x in 2020 to 0.5x at the end of Q4 2022. Manageable debt and a solid liquidity position speak for its balance sheet strength. The company will likely see higher profitability this year due to lower interest expenses.

Many companies suspended dividends during the pandemic crash as cash retention became vital. However, CNQ was among the very few that kept its dividends growing. CNQ has increased shareholder payouts for the last 23 consecutive years thanks to its superior balance sheet and earnings growth visibility. The stock currently yields 4.6%, higher than the broader market average.

CNQ stock has returned 5% in the last 12 months and 350% in the last three years. It is currently trading seven times its 2023 free cash flows and 10 times its earnings. That’s a tad rich valuation compared to peers.

However, given its superior balance sheet, earnings growth prospects, and dominating market position, CNQ warrants a premium valuation. Despite its stretched multiple, it will likely continue to trade strong and outperform peers. So, a top energy company with a low-debt burden with a hoard of cash for shareholder returns is a worthy investment opportunity.

North West Company

Selling groceries in remote villages of Northern Canada and Alaska seems like a boring business. And that’s what the North West Company (TSX:NWC) has been doing for decades. However, this boring business has created decent shareholder wealth for years.

NWC stock has returned 15% since last year, notably standing tall in bear markets. In the last five years, it has returned 12% compounded annually, including dividends. It currently offers a dividend yield of 4%.

North West Company has seen its earnings grow by 14% compounded annually in the same period. Margin stability and stable free cash flow growth drove shareholder value all these years. The company currently has $400 million in debt, about 37% of its total capital. Its leverage ratio comes to around 1.3x, much lower than the industry average.  

NWC stock is currently trading 15x earnings and looks discounted. Retailers in Canada trade at a higher multiple, indicating NWC’s relatively discounted valuation. However, a defensive nature and mediocre growth prospects justify the stock’s subdued valuation.

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.

The Motley Fool recommends Canadian Natural Resources and North West. The Motley Fool has a disclosure policy. Fool contributor Vineet Kulkarni has no position in any of the stocks mentioned.

More on Dividend Stocks

Utility, wind power
Dividend Stocks

Got 500? 1 Green Energy Stock to Buy and Hold Forever

A TSX green stock is a compelling investment option for long-term, socially conscious investors.

Read more »

Piggy bank and Canadian coins
Dividend Stocks

How to Use Your TFSA to Earn $128 Per Month in Tax-Free Income

These TSX dividend stocks offer high yields and monthly payouts. These stocks can help you earn over $128 in tax-free…

Read more »

Confused person shrugging
Dividend Stocks

Down 27% From All-Time Highs, Is Brookfield Infrastructure a Buy Right Now?

Down almost 30% from all-time highs, Brookfield Infrastructure is a TSX dividend stock that should deliver outsized gains to shareholders.

Read more »

ways to boost income
Dividend Stocks

TSX Stocks Down Big: Which Ones Are Worth Buying Today?

While this TSX stock may have taken a plunge, it doesn't seem to be from anything the company has done…

Read more »

Canadian flag
Dividend Stocks

The 3 Best Canadian Dividend Stocks You Can’t Ignore

These stocks provide high dividend yields, steady cash flows, and help anchor portfolios against market fluctuations.

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

Stock Market Sell-Off? These 2 Dividend Knights Are Safe Bets Now

Whenever you're fearful about what the future of the stock market holds, just go back to basics with these two…

Read more »

dividends grow over time
Dividend Stocks

Income Investors: These Canadian Dividend All-Stars Are Raising Payouts Again

Long-term income investors can consider these Canadian dividend all-stars that are trading at good valuations.

Read more »

Paper Canadian currency of various denominations
Dividend Stocks

Here’s How Many Shares of ZMI You Should Own to Get $500 in Monthly Dividends

This BMO monthly income ETF is diversified and easy to understand.

Read more »