The timing of stocks could be one of the biggest self-defeating moves in investing. Instead, choosing recession-resistant, very stable, and outperforming stocks for our long-term portfolio goes a long way. Here are three of those TSX stocks that can continue to trade higher over the long term, regardless of the market direction.
Canadian Pacific Railway
The second largest railway fleet Canadian Pacific Railway (TSX: CP) (NYSE: CP) has become even more attractive after its recent Sud de Kansas City redemption announcement. The agreement will significantly increase its network and expand its presence in Mexico and Canada.
Although Canadian Pacific is the second largest rail freight operator after National Railway of Canada, the prior notably outperformed his highest peer in recent years. CP stock has returned 675% over the past decade, while CNR has returned 427%.
Rail freight carriers like Canadian Pacific faced weakness during last year’s pandemic. But they were among the very few to recover faster due to the nature of their business.
Canadian Pacific’s unique and expanding network is expected to have a positive impact on earnings growth over the next several years. Its relatively cheaper valuation and stable dividends make it an attractive bet for long-term investors.
Algonquin Power & Utilities
Algonquin Power & Utilities (TSX: AQN) (NYSE: AQN) operates a strong mix of regulated utilities and renewable assets. Its large regulated operations provide stable earnings while renewables provide growth. As a result, Algonquin has shown relatively higher earnings growth in recent years compared to comparable utilities.
Superior earnings growth also translated into market performance. AQN stock has returned 550% over the past decade, notably outperforming TSX Composite Index and peers.
AQN stock offers a stable and reliable dividend yield of 4% at the moment. While lower than comparable utility stocks, I believe it offers higher total return potential than peers. In addition, Algonquin intends to increase its dividends by 10% in 2021.
With the stability of its operations and the visibility of its earnings, investors can look forward to consistently growing dividends from AQN over the long term. I expect AQN’s outperformance to continue over the next several years, mainly due to its decent dividends and superior earnings growth.
The worst seems to be over for Canadian banks. At least their revival of earnings growth and declining provisions indicate it. The second largest in Canada Banque Toronto-Dominion (TSX: TD) (NYSE: TD) is one of the main stocks to play in the economic recovery. Its strong presence south of the border and its solid credit portfolio set it apart from its peers.
For the most recent quarter, TD Bank’s revenues increased 8%, while its net income increased 10% year over year. TD shares are currently losing 4%, in line with their peers. It has returned almost 40% in the past 12 months.
The Canadian banking regulator has banned increases in bank dividends following last year’s pandemic. However, the ban is expected to be lifted next quarter, given the relative improvement in their credit quality.
TD is likely to increase its dividends by a higher number this year if it does not choose to remain cautious.
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Fool contributor Vineet Kulkarni has no position in any of the stocks mentioned. David Gardner owns shares of Canadian National Railways. The Motley Fool owns stock and recommends Canada’s National Railways. The Motley Fool recommends Canada’s National Railways.