Where is it best to invest $1,000 this month? It depends on when you need your money back. The sooner you need your money back, the less risk you should take. Cash earns good interest today. For example, you can park $1,000 in a high-interest savings account if you expect you’ll be spending this money within a few months. If you don’t need the $1,000 for the next year, you can lock it in a Guaranteed Investment Certificate (GIC) for a yield of about 5.7%.
For long-term investing, you can consider a bond exchange-traded fund (ETF) like iShares Core Canadian Corporate Bond Index ETF for diversification. Because of its diversification across Canadian investment-grade corporate bonds with different maturities, it should limit the volatility from changes in interest rates while providing stable income. Currently, it offers a distribution yield of approximately 4%. And its management expense ratio is decent at 0.17%.
Rising interest rates since 2022 have weighed on utility stocks that naturally have sizeable debt on their balance sheets. Since 2022, Emera stock has corrected about 27% such that the stock now trades at the low end of its historical valuation — about 14.6 adjusted earnings.
Of course, in a higher rate environment, growth is expected to slow for the utility. For example, the utility stock increased its dividend by about 4.1% last month, which is lower than its five- and 10-year dividend growth rates of approximately 4.7% and 7%, respectively.
Emera has a track record of increasing its dividend. At $45.90 per share at writing, it offers an attractive dividend yield of close to 6.3%. Assuming a growth rate of 4% going forward, long-term investors can target a total return of north of 10% per year.
Additionally, valuation expansion could add to the returns. At the recent quotation, it trades at a discount of about 21% from its long-term normal levels. Coincidentally or not, this also aligns with the analyst consensus price target of $58.26, according to TMX.
If you’re feeling adventurous, you can investigate Jamieson Wellness (TSX:JWEL) as well.
Jamieson Wellness manufactures, distributes, and markets branded natural health products, including vitamins, minerals, and supplements. The company’s earnings have been resilient, but its stock valuation has come down to Earth. Previously, it has traded at north of 30 times adjusted earnings.
The stock of Jamieson Wellness has lost a substantial value of approximately 39% since 2022. The consumer staple stock is trading at its lowest valuation since it became publicly available not too long ago in 2017.
At $24.49 per share, the stock trades at about 15.5 times adjusted earnings and offers a dividend yield of 3.1%. This is a dividend that has been increasing every year since 2017. Its last dividend hike a couple of months ago was decent at 11.8%. Its dividend remains sustainable with earnings left over.
Getting to the analyst consensus price target that’s roughly 61% higher requires a re-ignition of growth. A subsequent decline in interest rates will help drive a higher valuation in the stock.
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* Returns as of 10/10/23
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