The Top Stocks to Buy With $500 Right Now

If you have money you don’t need for the next three to five years, you can put a portion in these top TSX stocks that offer good value.

Kay Ng

Kay began investing in dividend stocks around 2008 via the concept of value investing. Since then, she has expanded into growth investing, including in small caps. Her passion for investing has only grown over the years! After graduating from UBC with a BSc in Computer Science, she took university courses in financial markets, finance, and financial accounting. She has contributed her works to Motley Fool, Sure Dividend, and Seeking Alpha.

Published December 29, 2023 8:30 pm EST

| More on: FNVREI.UN

Here are some of the top stocks to buy with $500 right now. They are stocks that are on my watch list and have been corrected recently. I believe they are worthy of a closer look by investors who target total returns.

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RioCan REIT

Retail real estate investing isn’t in favour. Higher interest rates are one factor. In addition, RioCan REIT (TSX:REI.UN) cut its cash distribution by a third in 2021, leaving many investors distrusting the stock. However, I think the pullback is a good opportunity to buy the Canadian real estate investment trust (REIT) for solid income and total returns as its cash distribution appears sustainable and its valuation is good. Investors will need to be patient for solid total returns potential over the next three to five years using the Foolish investing philosophy.

As it stands now, RioCan’s portfolio is primarily composed of high-quality, necessity-based retail revenue, with about 86% of its portfolio in retail properties. It also has 10% in office properties and 4% in residential rental properties. Overall, its committed occupancy rate is high at 97.5%, with properties in key Canadian markets like the Greater Toronto Area, Ottawa, Montreal, Calgary, Edmonton, and Vancouver. It has 182 income-producing properties and 10 additional properties that are under development.

Notably, RioCan began increasing its cash distribution again in 2022. The last cash-distribution hike was almost 5.9% in February. And its funds from operations payout ratio is estimated to be about 61% for this year. So, there’s a good chance it will increase its cash distribution again in the upcoming February.

RioCan pays its unitholders well. At the recent price of $18.52, it offers a yield of 5.8%, paid out in monthly cash distributions. This is a discount of about 14% from the 12-month analyst consensus price target. Any news on interest rate cuts and good execution on its development pipeline would trigger the stock higher.

Franco-Nevada

Another stock that’s unloved by investors right now is Franco-Nevada (TSX:FNV). The gold royalty stock is down about 20% year to date due to the suspension of the Cobre Panama mine that’s operated by First Quantum. Specifically, Franco-Nevada has 22% exposure to Panama based on assets. The mine suspension was because the law that approved the revised contract for the mine was ruled to be unconstitutional in November. So, the mine is currently on preservation and safe maintenance. This is why Franco-Nevada stock trades at a discount to its long-term normal valuation.

Franco-Nevada has a diversified streaming/royalty portfolio that consists of gold, silver, oil, and gas assets. So, it will recover from this. Any positive news on the Panama mine issue will trigger a rally in the discounted stock.

It’s rare to find Franco-Nevada, a premier gold stock and Canadian Dividend Aristocrat trading at a cheap valuation. At $147.14 per share, the 12-month analyst consensus price target represents a discount of close to 26%. It also offers a dividend yield of about 1.2% as a bonus. The gold stock has good upside potential over the next three to five years, assuming some sort of normalization in its valuation.