Investing in the equity markets is more like a marathon rather than a sprint. It means you have to invest with a long-term horizon, purchasing shares of companies that can withstand multiple economic downturns while delivering inflation-beating returns.
We can see that just a handful of stocks are likely to outpace the broader markets over time, making index investing a winning strategy for new investors. However, investors with a higher risk appetite can gain exposure to individual stocks, too. Here are two safe TSX stocks to buy with $2,000 in 2024.
Image source: Getty Images
Brookfield Infrastructure stock
Down 27% from all-time highs, Brookfield Infrastructure (TSX:BIP.UN) currently offers you a tasty forward yield of 5%. Moreover, the company has raised its dividends for 14 consecutive years.
Brookfield Infrastructure owns and operates a diversified portfolio of cash-generating assets across sectors such as data centres, transportation, utilities, and midstream. Around 90% of the company’s cash flow is regulated or tied to long-term contracts. Further, around 80% of its cash flow is indexed to or protected from inflation.
Due to the predictability of its earnings, Brookfield Infrastructure increased funds from operations, or FFO, by 7% year over year to US$560 million in the third quarter (Q3) of 2023. Its FFO was driven by strong performance across segments, which reflected higher tariffs and the commissioning of US$1 billion of capital projects in the last four quarters.
Brookfield Infrastructure sold legacy and non-core assets worth US$2 billion in 2023 and will use the proceeds to invest in growth projects, driving future cash flows higher.
For instance, it acquired a 28% stake in Triton, a global intermodal logistics operator, for US$1.2 billion in Q3. BIP expects to generate a base case IRR (internal rate of return) above its target with Triton on the back of in-place cash yields. Triton’s leading market position and robust cash flows provide it with the flexibility to invest in fleet replacements and growth in favourable markets.
These growth initiatives should help BIP increase dividends between 5% and 9% annually. Analysts remain bullish and expect the TSX stock to surge over 20% above consensus price target estimates.
Hydro One stock
Valued at $23.5 billion by market cap, Hydro One (TSX:H) operates as an Ontario-based electricity transmission and distribution company. It owns and operates high-voltage transmission lines and low-voltage distribution networks serving residential, commercial, and industrial customers.
Hydro One’s capital investments and in-service additions for Q3 totalled roughly $1.3 billion, compared to $902 million in the year-ago period.
A widening base of assets allows Hydro One to pay shareholders an annual dividend of $1.19 per share, translating to a yield of 3%.
With more than 1.5 million customers and $31.5 billion in assets, Hydro One ended 2022 with sales of $7.8 billion. Analysts expect the company to increase sales to $8.1 billion in 2024, with adjusted earnings forecast at $1.9 per share.
Priced at 20.6 times forward earnings, Hydron One is reasonably valued and should expand its earnings at a faster pace once interest rates are reduced in the next 18 months.
An investment of $2,000 distributed equally in the two stocks back in January 2016 would have ballooned to more than $5,000 after adjusting for dividends, which is 20% higher than the returns generated by the TSX index.
