Quality, outperformance and dividend growth: I want them all. For long-term investments, aiming for dividend growth over current yield could lead to outperformance.
Here are two quality Canadian stocks that I would buy in April if I relaunched my portfolio today.
For the dividend-paying stocks below, I’ve chosen to illustrate their long-term return potential from 2007, as that was the year before the Great Recession. Since that time, these stocks have recovered and increased. Their five-year returns, which are also shown, provide a snapshot of their most recent returns.
I would buy this diverse Canadian stock today
Brookfield Asset Management (TSX: BAM.A) (NYSE: BAM) is a global alternative asset manager with US $ 600 billion in assets under management in real estate, infrastructure, renewable energy, private equity and credit. As an investor, manager and operator, regardless of geography and type of asset, he has great flexibility to stimulate growth.
Since 2007, Brookfield Asset Management shares have generated returns of approximately 10% per annum. Over the past five years, large cap growth stocks have generated returns of around 15% per year.
Brookfield Asset Management has increased its dividend for nine consecutive years with a five-year dividend growth rate of 8.8%. The company is in an excellent position to reinvest most of its available cash to grow the business, which is why its dividend growth has been lower than it might have been.
At US $ 44.53 per share on writing, the stock is roughly 17% undervalued and offers a return of almost 1.2%. According to analysts’ average price target, the stock has a 12-month upside potential of around 20%.
Investors should note that stocks sell in market corrections. For example, during the pandemic market crash last year, BAM’s stock fell over 40% from one high to the next.
This Canadian tech action is a buy in April 2021
Enghouse Systems (TSX: ENGH) is another diversified company that is one of the top Canadian stocks to buy in April 2021. It has two segments. One is focused on solutions for customer engagement, including video collaboration, call handling, etc. The other provides solutions for communications and media, utilities and defense organizations, as well as transportation, supply chain and public safety.
Since 2007, the tech stock has generated returns of around 21% per year. Over the past five years, the growth stock has generated returns of around 18% per year.
Enghouse has increased its dividend for 14 consecutive years with a five-year dividend growth rate of 19%, which roughly matches its five-year returns. Its sustainable payout ratio is around 36% of profits.
The title has just undergone a correction of 19% as growth is expected to slow after a superb run last year. Now is a good time to buy the undervalued tech stock before growth resumes.
At just over $ 60 per share at the time of writing, investors can get the share back for just over 1% return. Based on the average price target, the stock is 20% undervalued with upside potential of 25% over the next 12 months.
The insane takeaway
If I didn’t own stock in Brookfield Asset Management or Enghouse Systems, I would buy some in April 2021. Both are quality companies that are undervalued and can offer extraordinary returns over the long term.
If they sold in market corrections I would see them as opportunities to buy more stocks at even cheaper prices!
These Canadian stocks are also good to buy in April 2021.
The 10 best stocks to buy this month
Renowned Canadian investor Iain Butler just named 10 stocks Canadians can buy TODAY. So if you are tired of reading about other people getting rich on the stock market, this might be a good day for you.
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Fool contributor Kay Ng owns shares of Brookfield Asset Management and Enghouse. The Motley Fool owns stocks and recommends Brookfield Asset Management. The Motley Fool recommends BROOKFIELD ASSET MANAGEMENT INC. CL.A LV and Enghouse Systems Ltd.