Yahoo Finance Better Buy: 2 Stocks or 500 Shares?
Written by Christopher Liew, CFA at The Motley Fool Canada
A stock is a slice of ownership in a publicly listed company, although it could also mean a share or shares. However, veteran investors would know the difference between the interchangeable terms. Stock is a general term that’s usually synonymous with or connotes a publicly traded company. On the other hand, shares are more precise since they refer to the actual units of stock.
Assuming you buy 500 shares of Enbridge (TSX:ENB)(NYSE:ENB), you would say I have an investment in the energy infrastructure company. However, if you purchase 250 shares of Enbridge and 250 shares of the Royal Bank of Canada (TSX:RY)(NYSE:RY), you now own two stocks with a combined total of 500 shares.
Public listing
The common denominator of Enbridge and RBC is that both are issuers of shares. Companies list on the stock market or go public to raise capital for growth and expansion. Also, the public listing enhances visibility and boosts the trust of stakeholders.
Retail and institutional investors then purchase shares of the companies to make money when the value of the underlying businesses increases. Since Enbridge and RBC both trade on the Toronto Stock Exchange (TSX) and New York Stock Exchange (NYSE), Canadians and Americans can invest in Canada’s top-tier energy stock as well as the country’s largest bank.
Total spending
At their current share prices, you’d spend $13,577.50 to own 250 shares of Enbridge ($54.71 per share). RBC trades ($123.04) higher so you’d shell out more, or $30,760 for 250 shares. If you buy the energy stock only, the cash outlay is smaller ($27,155) because of the price difference. Stock prices move up, down, or sideways and are driven by various factors, including supply and demand.
Most investors invest in two or more stocks to diversify. You spread the risks by holding shares of different companies instead of only one company. Energy and financial are TSX’s heavyweight sectors, although the former (+45.42%) has outperformed the latter (-12.36%) year to date. Individually, Enbridge is up 15.1% year to date, while RBC is down 5.8%.
Blue-chip assets
Enbridge and RBC are mature and established Canadian companies. Besides the capital gains from price appreciation, investors in either stock earn recurring income from dividends. Both companies share a portion of earnings or profits with shareholders through dividend payments.
The $109.9 billion energy infrastructure company is a dividend aristocrat owing to its dividend growth streak of 26 consecutive years. If you invest today, the dividend yield is 6.33%. Your 250 shares will generate $214.86 in passive income every quarter. Enbridge has a $10 billion diversified secured growth program that should drive future growth.
RBC has a dividend track record of 152 years and its market capitalization stands at $171.24 billion today. The Big Bank stock pays an attractive 4.29% dividend yield. A $30,760 position (250 shares) will produce $322.21 every quarter. While net income in Q3 fiscal 2022 fell 17% to $3.6 billion versus Q3 fiscal 2021, management said RBC operates from a position of strategic and financial strength.
Stocks and shares
It helps to know the difference between stocks and shares, but it shouldn’t distract you from the ultimate goal. You invest in companies to make profits through capital gains and/or earn dividend income. The amount of shares is an important number when calculating your potential returns and how much of each stock to allocate to your portfolio.
The post Better Buy: 2 Stocks or 500 Shares? appeared first on The Motley Fool Canada.
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Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool recommends Enbridge.
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