Do you have a few thousand dollars you want to invest in the markets, but no idea about what to actually invest it in?
It’s a common dilemma for new investors to face. Everybody knows that the stock market tends to increase its participants’ wealth over time, but not everybody knows exactly what stocks to buy.
In general, it’s best to avoid “stock picking” altogether and invest your money in index funds. Such funds “spread your eggs across many baskets,” reducing your risk. You can always get your start in investing immediately by holding them. If you’re truly committed to holding individual stocks, then read on, because I’m about to reveal two Canadian blue-chip stocks that may be worth holding for an entire lifetime.
Canadian National Railway (TSX:CNR) is Canada’s largest railroad company. It transports $250 billion worth of goods each year, across Canada and the United States. It is the only North American railroad that touches on three coasts, giving it an edge in long-distance continent-spanning deliveries.
How is CN Railway actually doing with all these built-in advantages? Pretty good, all things considered. Last quarter, it did $4 billion in revenue, $1.8 billion in operating income, $1.1 billion in net income, and $1.69 in diluted earnings per share (EPS). This gives us a healthy 25% net profit margin and a 45% operating margin. Granted, these figures declined compared to the same quarter a year before. That’s to be expected in a cyclical industry like rail transportation.
The point is that CNR is a highly profitable company that has great margins and a low dividend payout ratio, giving the company plenty of room to raise its dividend.
Alimentation Couche-Tard (TSX:ATD) is a Canadian gas station/convenience store company. It is best known for owning the Circle K chain of gas stations. It bought the chain from ConocoPhillips back in the early 2000s. It then spent the better part of the 2010s expanding the chain across Canada.
Many companies invest in expansion, but ATD is known for going about it in a smarter way than certain others have. The company invests heavily in expansion, but it doesn’t borrow enormous sums to do so. Instead, it re-invests its profits into growing its business. The result of this is that ATD stock has a pretty low dividend yield. However, the yield has been growing over time, and the company is an undeniable success, boasting metrics such as the following:
- A 24% return on equity.
- 15% earnings growth (specifically EPS).
- 21.5% growth in operating cash flow.
- A 20% compound annual dividend growth rate over the last five years.
- An ultra-low 12.9% payout ratio.
These metrics are very encouraging, suggesting that Alimentation is the kind of company that can not only pay but raise its dividend.
So, is ATD stock worth the investment? On the whole, I’d say yes, it is. The company is run by mature, sensible people who are not going to sink their ship. I’d say it’s a worthy stock to sink a few thousand bucks into.
The post Got $2,500? 2 Top Stocks You Can Buy and Hold for a Lifetime appeared first on The Motley Fool Canada.
Before you consider Alimentation Couche-Tard, you’ll want to hear this.
Our market-beating analyst team just revealed what they believe are the 5 best stocks for investors to buy in October 2023… and Alimentation Couche-Tard wasn’t on the list.
The online investing service they’ve run for nearly a decade, Motley Fool Stock Advisor Canada, is beating the TSX by 25 percentage points. And right now, they think there are 5 stocks that are better buys.
See the 5 Stocks
* Returns as of 10/10/23
setButtonColorDefaults(“#5FA85D”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43A24A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
- Canadian Blue Chips: The Perfect Hedge Against Surging Interest Rates?
- How Safe Is Canadian National Railway’s Dividend Amidst Rising Operation Costs?
- CNR Stock: Buy, Sell, or Hold?
- Compounding Interest With Dividends: Top Stocks for Savvy Canadian Investors
- From Growth to Income: The Shift in Canadian Dividend Investing Trends
Fool contributor Andrew Button has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alimentation Couche-Tard. The Motley Fool recommends Canadian National Railway. The Motley Fool has a disclosure policy.