Is it possible to identify four stocks that are enough to secure a person’s financial future? According to finance textbooks, the answer is “no.” The more diversified the portfolio, the better — that’s what the professors say. In fact, the Motley Fool recommends that portfolios consist of at least 25 stocks on the low end. However, it is possible to invest profitably in portfolios that are on the smaller side of the acceptable range.
With that in mind, here are four Canadian stocks that could help you secure a prosperous future.
CN Railway
Canadian National Railway (TSX:CNR) is Canada’s biggest railroad company. It transports $250 billion worth of goods each and every year and has a massive rail network that touches three coasts.
CN Railway is an indispensable part of North America’s economic infrastructure. It ships high percentages of the grain, oil and timber consumed on the continent. It has only one competitor in Canada, and, as you’d expect based on that, it earns high margins, with a 35% net margin in the trailing 12-month period.
CNR is a dividend stock with a 2% yield. 2% might not sound like much, but CNR’s yield has grown over time. Over the last five years, it has grown by 10.4% per year. At that rate of growth, the dividend doubles in about seven years. If CNR keeps up the good work, today’s investors will have a higher yield on cost in the future.
TD Bank
Toronto-Dominion Bank (TSX:TD) is a Canadian bank stock with a 5.4% dividend yield. The stock’s current yield beats the yields on Canadian treasuries and Guaranteed Investment Certificates. It is the second-cheapest Big Six bank stock after Scotiabank, trading at 9.5 times earnings.
The reason why TD stock is cheap is because the company is being investigated for money laundering in the United States. Analysts expect TD to take $2 billion in fines related to the investigation. If the fines stop there then TD’s dividends will keep coming in no problem. There could be issues with regulators holding back the bank’s expansion efforts, although the investment banking segment is not subject to this risk.
Alimentation Couche-Tard
Alimentation Couche-Tard (TSX:ATD) is a Canadian gas station chain company. It got beaten down this year because it posted a few quarters of declining fuel sales. In the first half of 2024, oil prices went down, so that’s not surprising. However, ATD’s long-term trend is a good one.
The company expands by re-investing money into its own business. It does not borrow heavily, so it grows without uglying-up its balance sheet with debt. It stands to gain from increases in the price of oil (because it operates gas stations), but it will not suffer as much as a pure-play oil and gas company if oil prices go south. Overall, it’s a good business.
Fortis
Fortis (TSX:FTS) is a Canadian utility stock with a 4.4% dividend yield. It is a Dividend King, with 50 consecutive dividend increases under its belt. As a utility, Fortis enjoys stable revenue that comes in month after month. It is focused on growth, having spent several decades buying up utilities across Canada, the U.S. and the Caribbean. Finally, the company has a relatively modest amount of debt for a utility. Overall, it’s a safe and sound company that investors can depend on.
