Written by Christopher Liew, CFA at The Motley Fool Canada
Royal Bank of Canada Capital Markets recently released its top global stock picks for 2022. The list includes seven publicly listed companies on the TSX that represent multiple sectors of Canada’s economy. Likewise, all the Canadian-based companies are dividend payers.
Among the recommended names are Canadian Natural Resources (TSX:CNQ)(NYSE:CNQ), TELUS (TSX:T)(NYSE:TU), and Element Fleet Management (TSX:EFN). The trio forms a diversified stock portfolio for would-be investors. While the yields are not the highest on the exchange, the dividend payouts should be rock steady.
According to RBC Analyst Greg Pardy, Canadian Natural Resources has no CEO at the helm. However, it has different persons holding key positions like executive chairman, president, and CFO. Nonetheless, the $62.34 billion oil and gas producer isn’t at a disadvantage with the unique setup.
An 18-member management committee oversees all corporate matters from finance, and marketing to environmental, social, and governance (ESG), operations, and technology. The company’s long-life, low-decline assets are the competitive advantages, and Pardy said they provide “superior free cash flow generative power” for Canadian Natural Resources.
The energy stock’s overall return last year was an incredible 82.17%. As of January 7, 2022, CNQ trades at $59.76 per share and pays a 3.93% dividend. RBC forecasts a return potential of 17% in 12 months.
RBC Analyst Drew McReynolds gives a thumbs-up to Canada’s second-largest telecommunications company. He said, “In our view, no other company in our coverage has as many potential sources of upside to our [net asset valuation] as TELUS does.”
McReynolds added that the $40.36 billion company is well positioned to capitalize on new 5G growth opportunities without meaningful capital constraints, opportunity costs, or free cash flow impairment. TELUS also has excellent growth drivers in TELUS Health, TELUS Agriculture, and TELUS International.
The Q4 2021 results aren’t out yet, although TELUS recorded its highest total mobile and fixed customer growth ever in Q3 2021. Its president and CEO Darren Entwistle said, “TELUS’s continued execution excellence was again characterized by the consistent combination of industry-leading and profitable customer growth.”
TELUS’s current share price is $29.66, while the dividend offer is 4.42%. RBC’s 12-month price target is $33.22, or a 12% appreciation.
Dominant auto fleet manager
Element Fleet Management might be unfamiliar to many investors. However, the $5.31 billion company is North America’s largest vehicle fleet manager and pure-play automotive fleet manager globally. RBC Analyst Geoffrey Kwan said Element derives outsized benefits from long-term contracts and very low client turnover.
In the nine months ended September 30, 2021, Element reported a 1.72% and 25.21% growth in the top and bottom lines versus the same period in 2020. Its president and CEO Jay Forbes said, “Our business has never performed better, nor have we been better positioned in the market.”
Besides a profitable revenue growth in 2021, the company plans to increase its dividend by 19% in 2022. The current dividend yield is 2.35%. RBC forecast the share price of $13.17 to climb 34% to $17.60 in one year.
Other RBC picks
Apart from the three stocks in focus, RBC also recommends Alimentation Couche-Tard, AltaGas, Brookfield Asset Management, and Canadian Pacific Railway. The list should help income investors narrow down their choices to the best TSX stocks today.
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Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool owns and recommends Alimentation Couche-Tard Inc. The Motley Fool recommends ALTAGAS LTD., Brookfield Asset Management Inc. CL.A LV, CDN NATURAL RES, TELUS CORPORATION, and TELUS International (Cda) Inc.