Investing in Canadian stocks is quite difficult at the moment. Stocks that performed well in 2020 are now in the doldrums. Likewise, stocks that have not been appreciated by the market for years are now trading at ever higher levels. This is largely because the market is trying to figure out what a normalized economy will look like outside of the COVID-19 pandemic. Certainly, factors like inflation and the potential rise in bond yields send shivers down the spines of investors.
In reality, the best that an investor can do is to have a diversified portfolio with exposure to various sectors and asset classes. Own growth, dividend-paying stocks and some value. If you’re worried about economics like long-term inflation, here are three Canadian stocks that would make a lot of sense to own right now.
A leading Canadian infrastructure park
Brookfield Infrastructure Partners (TSX: BIP.UN) (NYSE: BIP) is a perfect stock that will perform well in an environment with moderate inflation and steady economic growth. It owns and operates a diversified portfolio of critical economic assets.
These include railways, ports, gas pipelines, energy export terminals, data centers and cell towers. Due to the essential nature of these activities, BIP generates very consistent and predictable cash flows. Much of its assets are contracted or regulated in one way or another.
However, when the economy is booming, it gets a share of the action. It enjoys the advantages of higher usage volumes and higher commodity prices. Likewise, 75% of its assets benefit from rate hikes indexed to inflation.
Therefore, the company has a lot of integrated organic growth to come. As a result, it can regularly increase its dividend by around 10% per year. Today it pays a dividend of 3.79%, but given the dividend growth, the BIP is a gift that keeps on giving.
A leading Canadian pipeline inventory
Pembina pipeline (TSX: PPL) (NYSE: PBA) is another Canadian stock that would be good to have on your radar. It operates energy infrastructure for energy producers in Western Canada. It is a stock that was hated only a few months ago.
Yet despite the pandemic, Pembina’s business has run very admirably. He has a very careful management team. It took the 2020 downturn to improve its balance sheet, reduce costs, find efficiencies, and improve its pipelines and processing capacity.
Almost a year after the oil crash of March 2020, this activity is in excellent condition. The volumes of its pipelines are increasing significantly and its gas processing business generates large price margins. It is a rare occurrence that all aspects of its diverse business are operating at full capacity.
Yet today they are. If the global economy continues to recover from the pandemic, Pembina should see a very good rise. Today, this Canadian stock is yielding an excellent 6.5% return, and I expect it could rise in 2022 if fundamentals hold.
A promising residential REIT
If you want to fight inflation, real estate has always been a great asset to own. Rather than buying your own rental property and dealing with the hassle of rental and maintenance, why not just buy FPI BSR (TSX: HOM.U)?
BSR owns garden-style residential properties in Dallas, Houston, Austin, and Oklahoma City. Many Canadians may not recognize it, but these are some of the fastest growing municipalities in North America.
BSR has spent the past few years recycling its portfolio into newer, better located properties, offering attractive rental rate growth opportunities. As a result, this Canadian stock has very favorable favorable winds supporting long-term cash flow growth.
Despite a recent rise in its share price, BSR is a huge bargain. In many ways, its properties and operational platform are superior to many peers. Yet, it still trades at a comparatively significantly reduced price. In addition, this Canadian stock pays a very attractive dividend of 4%. If you want to combine value, growth and income, BSR is an ideal inflation-protected stock to hold for the long term.
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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a premium Motley Fool service or advisor. We are Motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer, so we’re posting sometimes articles that may not meet recommendations, rankings or other content. .
Robin Brown, a silly contributor, owns shares of Brookfield Infrastructure Partners, BSR REAL ESTATE INVESTMENT TRUST and PEMBINA PIPELINE CORPORATION. The Motley Fool recommends BROOKFIELD INFRA PARTNERS LP UNITS, Brookfield Infrastructure Partners and PEMBINA PIPELINE CORPORATION.