2 Top Stocks For December 2019 + Comments

Contributors at Motley Fool Canada (including myself) cooked up a list of 15 top stocks for December 2019. Actually, I had trouble choosing my top idea for this month as the market kept grinding higher. I chose Enbridge (TSX:ENB)(NYSE:ENB), a defensive name that’s fairly valued with a high dividend yield and a proven track record of dividend growth.

I’ll comment on some of my colleagues’ picks.

Another Solid Energy Dividend Payer

Two contributors picked TC Energy (TSX:TRP)(NYSE:TRP), a smaller peer of Enbridge in the energy infrastructure space. TC Energy is a quality dividend name also but Enbridge offers a bigger yield right off — 5.87% versus TC Energy’s 4.48%, which is just a little more defensive should a market correction happen soon.

The Renewable Energy Space

Two contributors chose a stock in the renewable energy space: Innergex Renewable Energy (TSX:INE) and TransAlta Renewables (TSX:RNW). Clean and renewable energy is a good space to be in as it has secular growth, but I don’t have a strong opinion about these two names in particular.

Given the run-up in utilities in general lately, I think it’s best for investors to consider the space when it’s out of favour again. 

hydropower plant in Ontario
Source: Author – A hydropower plant in Ontario
Read More

CIBC: Stable And Safe With A 5% Yield

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) generates stable earnings, which translates to a stable stock most of the time. Stable earnings coupled with a sustainable payout ratio makes CIBC’s current yield of 5% solid.

CIBC’s stock often gives the notion that it underperforms the other Big Six Canadian banks, but as we shall see, that’s not always the case.

Year-to-date results

In the first nine months of the fiscal year, CIBC reported adjusted earnings per share (“EPS”) of C$9.07, down 1.5% against the comparable period a year ago. These are stable enough earnings and led to a payout ratio of just under 46%. As well, its return on equity fell 2% to 15.8% year over year.

Is CIBC a Buy?

Over the next 3-5 years, the other Big Six Canadian banks are estimated to experience EPS growth that will be more than twice as fast as CIBC’s estimated EPS growth of 2.2%. Therefore, the stock trades at the lowest P/E among the banks for a reason.

It’s best to consider names like Toronto-Dominion Bank (TSX:TD)(NYSE:TD) or National Bank of Canada (TSX:NA) for long-term investment, especially on dips.

Read More

3 Important Dividend Stocks In My Stock Portfolio

I have a strong reason to keep dividend stocks, Johnson & Johnson (NYSE:JNJ), Brookfield Infrastructure Partners L.P. (TSX:BIP.UN, NYSE:BIP), and Toronto-Dominion Bank (TSX:TD, NYSE:TD), in my portfolio.

Johnson & Johnson logo

Johnson & Johnson

Allow me to be crystal clear. J&J will not deliver the highest returns as a stock in the healthcare space. I have other stocks for that. At the moment, that includes deep-value dividend stock, CVS Health (NYSE:CVS).

However, J&J’s financial performance is highly stable and predictable. Since 1999, the diversified healthcare conglomerate has increased earnings every single year on a per-share basis. Not surprisingly, it has increased its dividend every year in that period as well. 

Source: F.A.S.T. Graphs – J&J’s earnings and dividends persistently grow

Therefore, J&J stock serves as an excellent anchor for a diversified portfolio. Even when a recession hits, there’s no need to worry about its staying power. In fact, in the last two recessions, it thrived with double-digit earnings and dividend growth!

To sum it up, JNJ stock serves as a stabilizer and high-quality cash cow in my portfolio. I’ll continue adding to it at good valuations as a core holding of my diversified portfolio. 

Currently, I’d consider the stock to be fairly valued to modestly undervalued. At $135 per share, it trades at 15.7x earnings and is estimated to have earnings-per-share growth of 6% per year over the next three to five years. The stock also tends to command a premium multiple due to its high quality.

JNJ stock offers a safe yield of 2.8% backed by a payout ratio of 44%. It’s set to increase its dividend in late April.  

Read More