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Don’t Overlook These Canadian Large-Cap Stocks Just Because They’re Everywhere

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Image source: Getty Images.

Written by Amy Legate-Wolfe at The Motley Fool Canada

Large-cap stocks tend to be the ones Canadian investors will see first and foremost when they start investing. These are the companies that are the biggest on the TSX today — ones that have been around for decades, in some cases!

But just because you see them first doesn’t mean they should be ignored. Far from it! Canadian investors should instead consider these as the best of the best — ones that are being recommended over and over for good reason. Today, let’s look at three to consider.

Fortis stock

Fortis (TSX:FTS) has long been recommended for its safety and security. This comes from being a utility stock on the TSX today. The company has grown both organically and through acquisitions for years or even decades!

In fact, Fortis stock is now, as of November, one of two Dividend Kings on the TSX today. This means it’s grown its dividend each and every year for the last 50 years! That’s quite an accomplishment on its own. But it demonstrates that Fortis stock and its utilities have remained stable throughout that time. That’s because it secures long-term contracts in an industry that will be around indefinitely.

Meanwhile, Fortis stock offers value with a dividend yield of 4.34%. It trades at just 17.51 times earnings, with shares on par with where they were a year ago. That dividend is also far higher than its five-year average of 3.64%. Furthermore, it remains safe at a healthy 73.14% payout ratio.

Constellation Software

Another large-cap stock to consider is Constellation Software (TSX:CSU). Granted, this comes with a high share price, but for good reason. CSU stock has grown from double-digit share prices to over $3,000 this month. That comes from acquiring the most essential software companies out there again and again.

The company is now one of the most successful stocks on the TSX today. CSU stock has long shown that its management team knows just how to identify these safe, essential software companies. The ones that run our everyday lives, without us even knowing it. It’s been so successful, in fact, that it created a spin-off stock last year in Europe!

Now, Constellation stock is up 46% in the last year, which shows incredible growth during a volatile period — even as a tech stock! Now, it isn’t focused on dividend increases, which is why the payout ratio is so low at 16%. However, that focus goes right into acquiring more companies. So, for returns, I would certainly consider Constellation stock.

Royal Bank

As its peers reported losses, Royal Bank of Canada (TSX:RY) reported profit during its latest earnings report. And honestly, that’s what comes with being the largest of the Big Six banks, with less exposure to the United States. While this might hurt growth in the long run, it does help keep the company stable in the near term.

In fact, that stability is exactly why I would consider RBC stock even as a large-cap stock. RBC stock has been around for over 150 years. In that time, it’s been through recessions, depressions, and now even a pandemic. And it continues to report a profit and surge past earnings estimates.

So, after an earnings jump, now is a great time to pick up RBC stock on the recovery. You can grab a 4.55% dividend yield as well, far higher than the five-year average of 3.9%. And that remains quite healthy, with a payout ratio at 50.92% as of writing. So, these three large-cap stocks remain the best options on the TSX today — even if everyone else has already bought them.

The post Don’t Overlook These Canadian Large-Cap Stocks Just Because They’re Everywhere appeared first on The Motley Fool Canada.

Should You Invest $1,000 In Constellation Software?

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Our market-beating analyst team just revealed what they believe are the 5 best stocks for investors to buy in November 2023... and Constellation Software wasn't on the list.

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See the 5 Stocks * Returns as of 11/14/23

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Fool contributor Amy Legate-Wolfe has positions in Royal Bank Of Canada. The Motley Fool recommends Constellation Software and Fortis. The Motley Fool has a disclosure policy.

2023