2 best Canadian stocks to start your RRSP wealth fund
Canadians have saved a lot of money over the past year, and many are using the funds to start or expand their RRSP portfolios. The stock market as a whole is expensive today, but some of the major Canadian stocks still appear to be undervalued.
Nutrien (TSX: NTR) (NYSE: NTR) is a leader in the global fertilizer industry. The company produces and sells potash, nitrogen and phosphate to growers around the world who use crop nutrients to improve crop yields. Annual wholesale contracts are negotiated with countries like China and India. Sales also take place in the global spot market. In addition, Nutrien has a retail division that sells seeds and crop protection products.
The fertilizer sector is emerging from a multi-year slump. Potash prices are rising and global sales are expected to reach an all-time high in 2021. High crop prices in 2020 have continued this year, resulting in high demand for nutrients for crops as farmers can afford to spend more on fertilizer and plant additional acreage. to take advantage of the high market conditions.
Nutrien recently announced that it will increase its potash production by one million metric tonnes. Growing demand and tight market conditions triggered the first increase of 500,000 tonnes. A decision by the EU, UK, US and Canada to put sanctions against Belarus paved the way for the second increase of 500,000 tonnes. Belarus is a major producer of potash for the world market.
Nutrien is expected to deliver strong results this year and through 2022. The long-term outlook is also positive. The growing wealth of the middle class and the steady increase in the world’s population means that farmers will need to produce much more food over the next few decades.
The stock is trading at almost $ 75 per share at the time of writing. This looks cheap given the favorable winds behind the demand for nutrients for crops and the upward trend in prices. Nutrien has the potential to generate tons of free cash flow over the next several years. It wouldn’t be surprising to see the stock price surpass $ 100 by the end of 2022.
Enbridge (TSX: ENB) (NYSE: ENB) is a giant in the North American energy infrastructure industry. The company transports 25% of all oil produced in Canada and the United States. Enbridge also transports 20% of the natural gas consumed in the United States and has a growing renewable energy division.
Building large pipelines is a challenge these days and the situation is not expected to improve amid strong government and public opposition to new projects. This is a barrier to Enbridge’s traditional growth strategy, but the company’s current capital program is heavily focused on natural gas assets. In the future, more investment in green energy is likely to be underway.
Natural gas has a bright future. Countries know they need to switch from oil and coal to renewable energy sources. Natural gas is emerging as the choice of choice for many people during this transition. As a result, the demand for liquefied natural gas (LNG) is expected to increase in the coming years as coal and petroleum power generation is converted to natural gas.
Enbridge’s natural gas transportation and storage assets position it well to help producers get their product to domestic and international customers.
The stock is trading at nearly $ 49 per share and offers a dividend yield of 6.75%. Payment is expected to increase in line with the expected annual growth of 5-7% in Distributable Free Cash Flow.
The net result on the main RRSP shares
Nutrien and Enbridge are leaders in their respective industries and should be strong buy and hold choices for a self-directed RRSP portfolio. Dividend growth is expected to continue at a strong pace, and stock prices look cheap right now in an otherwise expensive market.
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This article represents the opinion of the author, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We are straight! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer, so we post sometimes articles that may not conform to recommendations, rankings or other content. .
The Motley Fool owns shares and recommends Enbridge. The Motley Fool recommends Nutrien Ltd. Fool contributor Andrew Walker has no position in the companies mentioned.