For investors seeking stability and growth potential, there is no shortage of investment opportunities on the TSX. Of course, higher growth and capital appreciation potential often come with greater volatility. But investors don’t have to endure dramatic ups and downs to achieve long-term excess returns.
This article introduces two dividend-paying stocks that offer a good balance between capital appreciation, dividends, dividend growth, and a low beta (meaning lower correlation with the overall Canadian stock market). Among them, value is the most important factor. The following two stocks range from mildly discounted to fairly valued, but are worth watching and buying as we move into the second half of the year.
Canadian National Railway Company (TSX:CNR) shares are climbing. For several years prior, the company underperformed due to industry headwinds. The stock has risen more than 20% year-to-date, and this momentum may not fade soon, especially if freight volumes remain strong and the company works to improve its operating ratio.
Not long ago, CN Rail was one of the most efficient railway operators. Despite recent performance falling slightly short, if management can reduce costs and boost profit margins while freight volumes continue to rise, there is still upside for the stock. The past few years have been tough, but the railway company’s recovery is tangible.
The stock offers a dividend yield of 2.2% and has a long history of generously increasing payouts each year. Its current trailing P/E ratio is near 22x, which is reasonable. With strong momentum and gradually fading headwinds, this may be a timely buy before the dividend yield drops below 2%. The stock has a beta of 0.99, meaning its volatility is roughly in line with the overall market.
TC Energy (TSX:TRP) has performed excellently year-to-date, rising about 25%. Unlike CN Rail, TC Energy’s share price continues to hit new highs. Although its trailing P/E ratio of 28.3x may seem somewhat frothy, this valuation is reasonable given ongoing expansion projects and strong, AI-driven natural gas demand.
The stock’s 3.7% dividend yield is relatively low for TC Energy, but it remains a substantial payout with room for further growth, especially as new projects begin to add to an already robust cash flow.
Summary: Both CN Rail and TC Energy offer stable dividend income and growth potential. CN Rail, with its improving operational efficiency and reasonable valuation, is suited for investors seeking stability. TC Energy benefits from energy expansion demand and AI-driven natural gas growth; despite a higher valuation, its growth momentum is strong. Investors may allocate appropriately in a balanced portfolio based on their own risk preferences.
