3 Top Canadian Value Stocks in November 2023

Value for money

After a decline for three consecutive months, the Canadian equity markets have started November strongly, with the S&P/TSX Composite Index rising around 4% in the first two days of trading. The announcement by the U.S. Federal Reserve of keeping interest rates unchanged appears to have increased investors’ confidence, thus driving the equity markets higher. With investors’ sentiments improving, you can buy the following three Canadian value stocks to earn superior returns.

BCE

The telecom sector is a highly capital-intensive business. So, the fear that the rising interest rates could increase the telcos’ interest expenses and hurt margins has weighed on stock prices. Amid the weakness, BCE (TSX:BCE) is down over 5% this year, while its NTM (next 12 months) price-to-earnings multiple has also declined to 16.5.

However, the company’s long-term growth prospects look healthy amid the growing demand for telecommunication services driven by the growth in online shopping, and remote working and learning. Meanwhile, the company is making aggressive capital investments to expand its 5G and broadband reach, which could allow it to expand its customer base and drive its financials. Amid these growth initiatives, the telco added 104,159 new fibre connections and  231,212 wireless connections in the third quarter.

Meanwhile, its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) increased by 3.1%, while the adjusted EBITA margin increased by 0.9%. Also, the company generated a solid cash flow of $2 billion from its operations. Considering its solid underlying business, growth prospects, attractive valuation, and healthy dividend yield of 7.21%, I am bullish on BCE.

Canadian Utilities

Second on my list would be Canadian Utilities (TSX:CU), which generates, transmits, and distributes electricity and natural gas. It serves around 2 million customers. The company has delivered an impressive annualized total shareholders’ return of 9.3% over the previous 20 years. However, the utility has been under pressure this year, losing over 10% of its stock value. The correction has dragged its valuation down to attractive levels, with CU stock trading at 13.7 times analysts’ projected earnings for the next four quarters. Its forward dividend yield also stands at a healthy 5.89%.

After putting Barlow Solar into operation in the third quarter, Canadian Utilities expects to put Deerfoot Solar and Empress Solar into operation in the fourth quarter. Besides, the company also has several projects in various stages of development, which can increase its production capacity by 1.5 gigawatts. Further, the energy provider projects its rate base to grow at an annualized rate of 2% through 2025. These growth initiatives could boost its financials, thus allowing it to continue its dividend growth. CU has raised its dividends for 50 years, while its forward yield is 5.89%.

Suncor Energy

My final pick would be Suncor Energy (TSX:SU). The oil and natural gas producer has returned over 13% this year. Despite the recent surge, the company still trades at an attractive NTM (next 12 months) price-to-earnings multiple of 8.2. With the Federal Reserve of the United States and Bank of England keeping their benchmark interest rates unchanged, the oil price has increased over the last two days. Also, the escalation of the Israel-Palestine war could further drive oil prices higher. Meanwhile, analysts are projecting oil prices to remain elevated in the near-to-medium term.

Higher oil prices could benefit oil-producing companies, including Suncor Energy. Meanwhile, the company is expanding its production capacity by making a capital investment of $2.7 billion in the first two quarters of this year. It also plans to invest around $2.7-$3.1 billion more this year. Besides, its acquisition of TotalEnergies’ Canadian operations could further boost its financials. The company also pays a quarterly dividend of $0.52/share, with its forward yield currently at 4.43%. Considering all these factors, I expect Suncor Energy to outperform the broader equity markets.

The post 3 Top Canadian Value Stocks in November 2023 appeared first on The Motley Fool Canada.

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* Returns as of 10/10/23

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Fool contributor Rajiv Nanjapla has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.