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As we bid farewell to 2020, here are some top Canadian Stock to buy in 2021

We can all agree that 2020 was a year of upheaval with some stocks on the Canadian Stock Market performing well, some barely hanging on, and others remaining flat throughout. Looking forward to 2021, we’re entering a year that will bring vaccine rollouts and economic recovery, with experts predicting that stability will return from the summer of 2021 to the start of 2022. Other predictions include inflation and a growing focus on environmental sustainability.

The impact of the COVID-19 pandemic on the Canadian economy may take years to recover, but there’s money to be made if you know where to look. Here at Supercharged Stocks, we’ve done our homework and summarized the best Canadian stocks to keep your eye on and invest in 2021:

The recovering energy sector

One of the highest value stocks on the TSX today is Enbridge Inc., (TSX: ENB). Though the energy market was significantly impacted by the COVID-19 pandemic, it’s showing promising signs of recovery. Enbridge represents one of the most resilient stocks on the TSX today, and the company plays a pivotal role in the Canadian economy. It’s also one of the most economically priced stocks, at approximately 25% off its 52 week high, paying an 8% dividend.

Parkland Fuel Corporation, (TSX: PKI) is Canada’s and the Caribbean’s largest and one of the fastest growing, independent suppliers and marketers of fuel and petroleum products. It’s also a leading convenience store operator. The company’s growth is driven through strategic acquisitions including the purchase of Chevron Canada’s downstream fuel business.

Over the last 5 years, the company has averaged revenue growth of 20.9% annually while growing earnings upwards of 20.3%. It has raised dividends for seven straight years and pays its dividend on a monthly basis, making this an attractive investment opportunity.

AltaGas, (TSX:ALA) is another opportunity to consider on the Canadian Stock Market today. The company was previously plagued by execution inefficiencies and a weak commodity sector. However, things have begun to turnaround. 86% of the company’s EBITDA is derived from low-risk regulated and contracted assets, and 57% of the EBITDA mix is derived from regulated gas distribution in the U.S., providing for stable cash flows.

Furthermore, within Asia, there is strong demand for natural gas liquids (NGL) and other heating fuels, and thanks to the recent acquisition of Petrogas, the company is now strongly positioned to ship its refined gas products abroad.

Experts predict that this top Canadian stock will see a 10-20% boost to earnings, cash flows, and potentially dividends in 2021. The stock currently yields 5%, with further upside potential in 2021.

You all know I am extremely bullish on clean green technologies.  Natural Gas is the transition fuel.  We will use natural gas to make hydrogen in the developed world and natural gas will help with the developing world transition out of coal.  NG Energy is one company with huge potential to do just that.  Canada is the global center for natural resource development financing, companies from all over the world get financing on the Canadian Stock Exchanges, primarily the TSX and TSX.V.

Thinking green on the TSX today

Clean energy is another sector for Canadian stock to buy that is predicted to enjoy a major recovery in 2021, and thinking green could yield big returns. One of the most promising investments on the TSX today is Xebec Adsorption, (TSXV:XBC).  Far from a traditional renewable energy company, Xebec provides end-to-end systems for gas purification and the production of renewable gases including natural gas and hydrogen.

With a growing focus on achieving a low carbon future, many industries are currently seeking methods to achieve a lighter environmental footprint while ensuring sustainability, and Xebec empowers companies to do just that. The company’s stock was up approximately 180% in 2020, and 2021 looks like it could be its strongest year yet on the Canadian Stock Market.

Another player to keep your eye on is Brookfield Renewable Partners, (TSX: BEP-UN) which operates one of the world’s largest publicly-traded renewable power platforms. The company’s portfolio consists of approximately 19,400 MW of capacity and 5,318 generating facilities in North America, South America, Europe and Asia. It’s been one of the fastest growing companies in the sector over the last five years.

BEP’s investment objective is to deliver long-term annualized total returns of 12%-15%, including annual distribution increases of 5-9% from organic cash flow growth and project development. And the company has made good on this promise. In March 2020, BEP acquired Terraform Energy, positioning the company as the largest pure-play renewable energy organization in the world.

The company currently yields a 2.50% dividend, and plans to grow the dividend from 5-9% annually over the next five years. One thing to keep in mind is that BEP is an expensive investment due to its size and popularity, and its’ likely that there will be marked swings in the company’s share price over the next several years.

For a more speculative stock with the potential to be an absolute game changer check out Vanadium Corp

Gold makes a comeback on the Canadian Stock Market

Gold stocks are now soaring on the Canadian Stock Market due to insecurities in the economy. Gold has often been regarded as a safe bet for investors during uncertain times, and as gold extraction continues to decline globally, a lack of reserve replacements could indicate a potential bull market. One Canadian stock to keep your eye on is Equinox Gold, (TSX: EQX).

With a focus on growth, the company has been swiftly upping production, successfully growing revenue and profitability. It has seven operating mines and is a well-financed company that is one of the only gold producers of scale operating entirely in the Americas. Their stock is up 35%, and with the company now trading more than 25% off its all-time high, there’s no shortage of upside potential.

Kinross Gold Corp, (TSX: K-T) is another player to consider in 2021. Founded in 1993, it’s a senior gold mining company with a diverse portfolio of mines and projects across the globe. Headquartered in Toronto, ON, the company focuses on delivering shareholder value through operational excellence, balance sheet strength, growth, and responsible mining practices.

The company is currently trading at an approximate 20% discount, after reporting strong financial numbers in 2020 and swiftly growing both its margins and earnings. In addition to growth prospects, the company has restored its dividend payouts, offering a yield of 1.6%.

Similarly, Agnico Eagle Mines Limited, (TSX: AEM), a Canadian-based gold producer with operations in Canada, Finland and Mexico, as well as exploration development activities extending to the U.S., is predicted to have a strong year ahead. In 2019, the company produced 1.8 million ounces of gold, totaling $3.579 billion USD. Over the last six quarters, the company has surpassed analyst estimates on top and bottom lines. It is the second largest gold producer in Canada, with a market cap of $25.6 billion, resting only behind Barrick Gold.
The company has demonstrated remarkable consistency in its growth, having achieved significant returns since the late 1990s, with a compound share price annual growth rate of 13.05%. The company further plans for a 25% increase in production by 2022. Furthermore, Agnico has been on a four year dividend growth streak, consistently growing its dividend at a pace of 11.44% annually. The company’s most recent increase more than doubled this rate as it increased its dividend up by 25%.

The company has demonstrated remarkable consistency in its growth, having achieved significant returns since the late 1990s, with a compound share price annual growth rate of 13.05%. The company further plans for a 25% increase in production by 2022. Furthermore, Agnico has been on a four year dividend growth streak, consistently growing its dividend at a pace of 11.44% annually. The company’s most recent increase more than doubled this rate as it increased its dividend up by 25%.

For an interesting twist on gold with additional upside potential of crypto currency read this.  

Financial alternative companies and Canadian bank stocks

On the road to recovery, Canadians are going to need access to quick cash more than ever, making Canadian stocks like goeasy, (TSX: GSY), a promising investment. goeasy Ltd. is a Canadian public alternative financial company that operates in two segments: easyfinancial, which offers high-interest loans to subprime borrowers, and easyhome, which sells furniture and other durable goods on a rent-to-own basis. The stock is currently up 8.30% and investors can expect to see further growth from this top Canadian stock over the coming years.

One of our country’s most valued Canadian bank stocks is The Royal Bank of Canada, (TSX: RY). RBC is a global enterprise with operations in Canada, the U.S., and 40 other countries across the globe. The bank is currently Canada’s second largest organization in terms of market capitalization, behind Shopify.

Over the last five years, the bank has grown revenue by 6% and earnings by 3.5% annually. The bank has also enjoyed an eight year dividend growth streak, with a yield within the 4.5% range. Interesting to note is that in 2019, RBC paid out more in dividends than Shopify had in total revenue. It’s also important to mention that not a single of the Big 5 institutions in Canada cut their dividends during the 2008 financial crisis nor during the COVID-19 pandemic. In terms of recovery, RBC’s stock is now outperforming broader markets.

High performing tech players

Outperforming the broader equity markets last year, the tech sector is producing massive returns. Lockdowns mandated in response to the COVID-19 virus shifted many companies to conduct business online and make the switch to a remote workplace, creating an unprecedented reliance on technology.

On the Canadian Stock Market, Lightspeed, (TSX: LSPD), had a stellar year in 2020, with its stock price increasing over 160%. Lightspeed is a point-of-sale and e-commerce software provider based in Montreal, Québec that works mainly with restaurants and retailers – two industries that are among the most significantly impacted by the COVID-19 pandemic.

With its software as a service (SAAS) business model, the company’s revenue growth has remained robust throughout the pandemic. Rising bankruptcy rates have not impacted the company’s continued growth as businesses rush to improve profitability which can be achieved in part by leveraging the type of platforms offered by Lightspeed.

Another major player to keep your eye on is Enghouse Systems Ltd., (TSX: ENGH). Started in 1984, Enghouse develops and sells enterprise-oriented applications software for a variety of industries including contact centres, telehealth and financial services sectors, communications and media outlets, utilities and defense organizations, transportation and public safety.

Enghouse has consistently generated profitable growth over the past several years and has beaten the benchmark index in terms of returns. In addition to growing demand for its products and solutions, Enghouse also benefits from strategic acquisitions – a key tenet of the company’s overall growth and diversification strategy. Its topline has grown at a compound annual growth rate of 10% since FY 2016, and its adjusted EBITA increased at a compound annual growth rate of 17% during the same period.

The combination of a profitable business model and strong cash flows has allowed the company to boost shareholder returns through higher payouts while raising dividends at a compound annual growth rate of 13.5% over the past five years.

When it comes to talking tech, of course we can’t forget about Shopify Inc., (TSX: SHOP) – the Canadian, multinational e-commerce company that is one of the highest performing stocks on the Canadian Stock Market in recent times. The company operates in two primary segments – subscription and merchant solutions.

Since the company’s IPO in 2015, Shopify has returned over 1200% to investors. Over the last five years, it has achieved revenue growth of 64.9% annually, which has slowed to approximately 52% over the last three years. The COVID-19 pandemic is only strengthening this growth, as brick and mortar becomes a thing of the past, and new stores on the Shopify platform have accelerated 71% quarter over quarter. One thing to keep in mind is that this company is expensive, and investors pay a premium for its continued growth.

Another key financial tech player is nuvei, (TSX: NVEI). Based in Montreal, Québec, nuvei is Canada’s largest private and non-bank payment processor that went public in September 2020, with a $700 million initial public offering on the TSX.

Prior to listing, nuvei was the largest privately held financial tech company in Canada. Over the course of 12 months, nuvei generated US$324M in revenue and $34B in gross transaction value. The company’s revenue grew by 64% in 2019, and 73% in 2020. Market experts predict a 26% average annual revenue growth over the next couple of years. As a fairly new listing, this investment opportunity is most suited to those investors with a higher risk profile.

Transportation & logistics during COVID-19

TFI International Inc., (TSX: TFII), is a Canadian transport & logistics company based in Montreal, Québec that is recognized as a North American leader with a vast network spanning more than 80 North American cities and nearly 17,500 employees. At the beginning of the COVID-19 pandemic , the stock plummeted, but regained its stride and is currently trading at 160% above former levels. TFI now remains relatively unscathed and in June 2020, reported a decrease in revenue of only 8.6%, while reporting increases in both EBITA and free cash flow.

The company is further fortified through several strategic acquisitions, purchased at discounted rates. Earnings over the last three years have increased at a rate of 61.6% annually. The company also boasts a nine year dividend growth streak and has raised dividends at a rate of 10.13% over the last five years.

Don’t count out the construction industry

There’s little doubt that the COVID-19 pandemic has taken its toll on the Canadian construction industry, not to mention, economies around the world. However one company – Hardwood Distributions, (TSX: HDI) – remains a key player on the Canadian Stock Market. The company is the largest distributor of architectural building products in North America, yet remains largely under the radar.

With 66 locations across North America, the company has successfully grown sales and adjusted profit per share by a compound annual growth rate of 20% and 41%. It is currently trading with a cash flow yield of 8%. Diversification including residential, repair and remodel, and commercial end use applications has protected this company from COVID-19 related downward shifts among certain regions, suppliers and customer bases.

The Company converts a significant portion of EBITDA to operating cash flow, has no term debt, and maintains revolver loans secured against high quality working capital. In 2021, the company will continue to carefully manage liquidity and utilize its revolver facility to increase cash on hand, limit non-essential operating expenses, and defer capital expenditures.   

With interest rates at an all-time low, HDI is poised to enjoy another strong year in 2021 with a solid balance sheet and outstanding management expertise steering the ship.

Telecommunications on the TSX

Telus, (TSX: TSE) has been touted as the top telecom stock to own on the Canadian Stock Market today due to its 5G capabilities and overall growth. Many people might assume that Rogers Communications is the telecomm player to place their bets on. However, Telus follows a different business model than Rogers which drives higher margins – the company did not invest in a media division and has instead turned its attention to telehealth and security. This strategy will allow Telus to grow its dividend which today, is considered the strongest in the sector due to its yield of 4.93%, 16 year dividend growth streak, and five year dividend growth rates of 8.18%.

Analysts are predicting double digit revenue growth for the company in 2021, as compared to predicted shrinking revenue growth for both Rogers Communications and BCE Inc.

Investing in Canada’s aging population

Savaria Corporation, (TSX: SIS) offers a product portfolio that makes life more accessible by improving mobility. Employing more than 1,500 people around the world, the company’s product selection is one of the widest available, including home elevators, commercial lifts, stair lifts, ceiling lifts and adapted vehicles. They operate in three primary segments – patient handling, accessibility and adapted vehicles.

Savaria has grown its revenue by 32% annually over the last five years, while growing earnings by 17.1% over the same time period. In 2021, analysts predict that the company will post 8% revenue growth and 21% earnings growth. In the past, the company has missed earnings estimates, but at the same time, the company boasts five year returns of nearly 200%. It also has a strong balance sheet with a current ratio of 2.5, currently paying out a 3.3% dividend each month.

The company’s payout ratio sits at 80% of earnings but is well covered by a strong cash flow. Though the pace of growth has been impacted by the COVID-19 pandemic, experts predict that this will rebound, as Savaria has a strong foothold in servicing Canada’s aging population which will comprise 23% of the total population by 2030.

The Market. The Model. The Mindset.

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In Conclusion

It’s a new year, and it looks like things are going to get better. What Canadian stock to buy above interested you most?

Leave it in the comments below!

Or if you have a stock that you think was missed on this list.

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