Diversifying one’s portfolio is crucial to maximizing one’s risk-adjusted returns over time. However, finding stocks that cater to income and growth objectives simultaneously can be a daunting task.
Fear not. In this article, I’m going to discuss three of my top picks providing an excellent mix of growth and income. These are stocks I think should be a part of every well-diversified portfolio today.
Every market crash seems to be a perfect time to load up on Canadian banks. Such was certainly the case for Royal Bank of Canada (TSX:RY)(NYSE:RY) this past year.
Indeed, investors who bought the bottom now enjoy high single-digit yields along with some pretty decent growth appreciation. I expect this rally to continue over the long term, as Royal Bank continues to be one of the top earners among its peers. Indeed, in Q1, the company churned out $3.85 billion in profit. Not bad, indeed.
The bank’s overall profit jumped 10% this past quarter, surpassing analyst predictions of adjusted profit of $2.28 per share. The company posted EPS of $2.69, handily beating these estimates. Royal Bank has seen breakthrough performance in its capital markets and personal and commercial banking operations. At its current stock price around $115, the bank offers a 3.7% yield.
If this stock is not already a part of your portfolio, this is one to consider adding right now.
Algonquin Power & Utilities (TSX:AQN)(NYSE:AQN) has remained on my radar for quite a while now, mainly due to the growth potential of this undervalued stock. It has a hybrid business model with a core underlying utilities business supplemented by strong growth prospects in its renewable energy portfolio. Additionally, Algonquin has made several well-timed acquisitions that have resulted in an impressive cash flow in a turbulent market.
I think investors do not pay enough attention to Algonquin’s renewable energy assets. This is one segment that can and will provide excellent dividend growth over the long term. As expected, the company’s core utilities business has also continued to perform very well and provide excellent cash flow stability. This is one of the key reasons why Algonquin has been able to continuously raise its dividend, despite a solid yield of 3.9%.
Investors seeking long-term, reliable returns will not go wrong with this stock.
Being a brick-and-mortar retailer at its core, Canadian Tire (TSX:CTC.A) is one of the oldest and most popular retail giants with almost 1,700 stores across the country. I think this is an excellent option to meet varied investment goals, because the umbrella company holds a number of impressive brands. Furthermore, the company has heavily diversified its operations beyond its physical stores. E-commerce growth remains strong and is the undercurrent to Canadian Tire’s impressive stock price growth of late.
Indeed, Canadian Tire was able to combat the pandemic-induced slowdown due to incredible growth of its e-commerce business. This has created a defensive moat around the retailer with a robust online channel designed for quick and prompt distribution. As of writing, the stock is trading around $182 and yields 2.6% — an impressive yield for retailers in the current market.
Like these top picks? Here are a few more to consider right now:
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Fool contributor Chris MacDonald has no position in any of the stocks mentioned.
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