Written by Amy Legate-Wolfe at The Motley Fool Canada
In today’s dynamic financial landscape, the TSX today is showing signs of recovery. But it still lingers below its 52-week high of $22,213, currently hovering around $20,000. For savvy investors, this presents a compelling opportunity to explore growth stocks that are poised for substantial gains. In this article, we will delve into three stocks I’ve recently considered purchasing. Each with strong earnings and a promising outlook.
Northwest Healthcare REIT
Northwest Healthcare Properties REIT (TSX:NWH.UN) is a compelling choice for investors seeking stability and growth in their portfolios. While the stock has experienced a decline from $9.50 to $6.80, representing a decrease of approximately 28%, the main allure for investors today lies in its dividend yield, which stands at an impressive 11.71%. Let’s explore the recent second-quarter earnings report to understand why NorthWest stock is an attractive investment.
For the three and six months ended June 30, 2023, NorthWest stock reported a remarkable 13% and 16.6% increase in revenue, respectively. Although adjusted funds from operations (AFFO) per unit decreased from $0.20 in the second quarter (Q2) of 2022 to $0.13 in Q2 2023 due to lower management fees and increased interest expenses related to floating rate debt, adjusting for the non-recurring component of management fees, AFFO would increase to $0.15 per unit for the quarter.
Operationally, the real estate investment trust boasts a high-quality and defensive portfolio, delivering a robust 5.1% same-property net operating income growth year over year. With a portfolio comprising over 2,000 tenants and a 96% occupancy rate, NorthWest stock offers diversified cash flow across its 231 properties. This makes it an attractive prospect for income-focused investors.
Bank of Montreal (TSX:BMO) offers a compelling case for investment, particularly as it expands its presence into the United States with the acquisition of Bank of the West, adding locations in the Midwest and California. Canadian banks have historically been regarded as safe investments, and BMO is no exception. The stock boasts a valuable price-to-earnings (P/E) ratio of 11.5 and a generous dividend yield of 5.02%.
Recent third-quarter results demonstrate BMO’s resilience and potential for growth. Net income of $1,454 million compared to $1,365 million in the same period last year, highlights the bank’s consistent performance. While the provision for credit losses (PCL) increased to $492 million from $136 million, BMO stock’s adjusted return on equity (ROE) of 11.7% remains strong, despite challenges in the market.
Canadian Pacific Kansas City (TSX:CP) made headlines in the last year with its acquisition of Kansas City Southern for an impressive US$31 billion. This strategic move positions CP as the sole railway running through North America, from Canada to the U.S. and Mexico. Despite already experiencing share price growth from $102 to $108 per share, there is room for further expansion, especially considering recent developments.
The B.C. port workers’ strike posed challenges for CP, resulting in an estimated negative impact of approximately $80 million in revenue. However, CP is determined to recover these losses over the remainder of the third and fourth quarters. The acquisition of Kansas City Southern, completed in April, marks a significant milestone and should continue to see more growth in the next few years to come.
In conclusion, NorthWest stock, BMO stock, and CP stock offer compelling investment opportunities. They strike a balance between dividends, share growth, and protection. Despite recent challenges, strong earnings reports and promising outlooks make them appealing choices for investors looking to capitalize on growth in a market poised for recovery. With careful consideration and a long-term investment perspective, these stocks have the potential to deliver solid returns in the coming years.
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Fool contributor Amy Legate-Wolfe has positions in Canadian Pacific Railway and NorthWest Healthcare Properties Real Estate Investment Trust. The Motley Fool recommends Canadian Pacific Kansas City and NorthWest Healthcare Properties Real Estate Investment Trust. The Motley Fool has a disclosure policy.