5 stocks I want to buy in 2022

5 stocks I want to buy in 2022

As I approach 15 years as a DIY investor, a hybrid investor no less, we inch closer to some major financial independence dreams. I’ll link to that update later on, below. 

Our hybrid investing approach has been both very successful and very simple over these 15 years, an approach I believe many investors can easily replicate for great investing results:

• Approach #1 – we own a number of Canadian dividend paying stocks for income and growth. We own nearly 30 different Canadian stocks within our non-registered account and across our Tax Free Savings Accounts (TFSAs). We own these stocks because we believe buying and holding our DIY bundle of Canadian dividend-paying stocks will, over time, provide some steady monthly income for future wants and needs in retirement.

You can find more details about how I built my own Canadian dividend stock portfolio here.

• Approach #2 – we’re owning more units of low-cost Exchange Traded Funds (ETFs) inside our RRSPs over time. While dividend paying stocks are great, we believe this is smart because we’re investing abroad beyond Canada’s borders. In doing so, we’ll add growth and diversification to our portfolio. While we still own some Canadian stocks and some U.S. stocks inside our RRSPs, we’re owning more ETFs in our portfolio for diversification. 

This way, via approach #2 we can largely set and forget part of our investment approach. 

5 stocks I want to buy in 2022

With a bias to getting paid and being rewarded to be a long-term shareholder, I find myself gravitating to a few stocks in particular in 2022 to bolster my future dividend income for semi-retirement while remaining tax-efficient. 

With that theme in mind, here are 5 stocks I want to buy more of in 2022, from Canada:

1. Equitable Group (EQB)

Equitable Group (EQB) is a growing Canadian financial services business that operates through the company’s wholly owned subsidiary, Equitable Bank. Equitable Bank provides a range of personal and commercial banking accounts and services, including a range of smart banking solutions for Canadians: fast international money transfers, easy U.S. dollar accounts and more. It operates several business lines, including single-family lending services, commercial lending services, commercial mortgage, and deposit services.

EQB has been growing in recent years and I don’t see the trend stopping. The company has excellent metrics and delivers a tax-friendly dividend yield of under 2% for non-registered accounts, focused on growth. I’ve owned EQB for the last year or so and I was the recipient of the recent two-for-one share split in 2021. 

In Q3 2021, the company saw assets under management (AUM) increase 13% year-over-year while posting major bank deposit growth thanks to a growing customer base: from 88,000 to 237,000. EQB shows off an impressive price-to-earnings (P/E) ratio in the high-single digits, offers a quarterly dividend of $0.185 per share (which is only going to increase in 2022), and sports a modest yield around 1%.

EQB is one of many Canadian banks I own and I have full intention of addiing more to my portoflio in 2022, and in fact, I already bought some early this year. I hope to add more after our TFSA and RRSP accounts are maxed out of contribution room by spring 2022. I see owning EQB as a long-term growth story. I hope I am right!

2. Algonquin Power (AQN)

With little surprise to many dedicated readers, AQN is back as another stock I want to own in 2022 – to pad my holdings in this company beyond the hundreds of Algonquin Power shares I already own. I’ve been a shareholder of this company for more than a decade now and I I see no reason why not to add more.

My thesis on AQN remains simple – for the sake of our planet, we need to go more green far sooner than later. I’m happy to support that push with my wallet. Algonquin Power & Utilities Corp. is a growing renewable energy and regulated utility company with assets across North America. This company both acquires and operates green and clean energy assets including hydroelectric, wind, thermal, and solar power facilities, as well as sustainable utility distribution businesses (water, electricity and natural gas).

Algonquin Power purchased Kentucky Power for a few billion recently and once the deal is complete, this is expected to add to its regulated asset base portfolio by billions of income more: bringing in more than 200,000 paying utility customers. Based on this acquisition and others over time, Algonquin Power management expects adjusted earnings per share to grow by 7-9% per year from 2022 to 2026. That means shareholders like me should see a steady rise in dividend growth for the coming years. AQN has already raised their dividend payout by 10% per year over the past decade. 

3. TD Bank (TD)

It has been said/written that to weather any market calamity, an investor might consider elements of an all-weather portfolio – one that is designed to do well regardless of changing market conditions. That all-weather concept was developed by Ray Dalio, a billionaire investor and founder of Bridgewater Associates, one of the largest hedge funds in the world.

Well, I don’t have the money to invest (nor throw away!) via a hedge fund (ha!) but I do believe a bank stock like TD Bank (TD) is one that can likely weather most market storms. I’ve been a shareholder in TD since early 2010, coming out of the Great Financial Crisis and TD is another a stock I hope to buy more of in 2022.

TD is one of our biggest banks and one of the best brands around. As interest rates rise in 2022 (maybe, eventually??), banks like TD and EQ Bank should benefit a bit. Last year, the stock prices of EQB and TD surged. Of course, we’ll see what 2022 brings but I intend to buy more of TD if and when I get the chance in my taxable account. I’ll have to decide if I add more EQB or TD since there is likely only so much money to go around!

In the meantime before that purchase, I’ll earn a tidy 4% or so in dividend yield and get paid to wait for another dividend increase likely in the 5-10% range in the coming 11 months. 

While many REITs are usually in a portfolio for distributions and yield, I have a slightly different bias in my asset accumulation years: I don’t shy away from growth potential. You’ve seen this above with EQB and Summit REIT is yet another example. Although the current yield is hardly a mouth-watering 2.5%, I like the upside as the pandemic rolls on with some exposure to industrial real estate assets — I own some light industrial properties and warehouses without being a direct landlord.

I started to own SMU.UN a few years ago. I will keep an eye on this one. That said, I have enough Canadian stocks and REITs.

So, I’m likely to buy more XAW to consider for my TFSA to offset individual stock risk which is where I am leaning.   

Further Reading: Lessons learned in diversification.

Lessons learned in diversification – reducing my Canadian home bias

Besides, aligned to the diversification and all-weather comments I made above, I like REITs as their own asset class per se given when other sectors dip, REITs can sometimes thrive. I already own other REITs in my portfolio like REI.UN and CAR.UN in particular, so owning Summit is a nice industrial complement to those other retail and residental real estate assets. 

Just don’t own too much real estate in your portfolio. I mean, some REITs are all fine and good but I wouldn’t go overweight. The same things that can make you wealthy are the same things that can make you poor, if you’re not careful.

Further Reading: How much real estate should you have in your portfolio?

5. Waste Connections (WCN)

While past performance is never indicative of future results, it’s hard to imagine a world without appropriate waste management. Waste Connections (WCN) is one of the largest waste management companies in North America, operating in dozens of U.S. states and throughout most of Canada, headquartered just north of Toronto. Waste Connections also provides non-hazardous oilfield waste treatment, recovery and disposal services in several basins across the U.S., as well as intermodal services for the movement of cargo and solid waste containers in the Pacific Northwest. 

At last check, the company manages some $14 billion in assets that include its vehicles, dump sites, and waste processing/recycling facilities. In the last 10 years, the stock has grown well over 400% but unfortunately I didn’t own it 10 years ago! (I do now and have done so throughout 2021 that saw my returns in this stock over 30%).

Regardless if the economy is wide-open (let’s hope!) or partially closed, you need waste management services to opeate effectively and efficiently in our modern world. I own this stock for this recession-proof reason. 

In October of 2021, WCN increased their dividend by 12.2%. I anticipate another low-double-digit dividend increase will occur in 2022. If I buy more shares of WCN, like I intend to, I’ll take advantage of that increase even more.

5 stocks I want to buy in 2022 summary

Of course, investing in dividend paying stocks is hardly everything. There are far more ways to invest. Then again, I do enjoy getting paid to be a shareholder from all of these companies and more.

I have a bias to owning companies that have a long, established history of rewarding shareholders and some of these stocks above definitely fit that template. Part of the reason I will continue to invest in dividend paying stocks is higher inflation. When it comes down to it, there are two key ways to make money in the stock market: capital appreciation and dividends. Capital appreciation gets lots of attention, as it should, but this is a good reminder that dividend payments have accounted for ~ 40% of the U.S. stock market’s return since 1930. Full stop, with inflation on the rise, companies that pay a sustainable and growing dividend have the potential to grow their income to keep up with inflation.

On my Dividends page, I highlight some other inflation-fighting stocks I own:

• Canadian banks (examples: RY, BMO).
• Canadian insurance companies (example: MFC).
• Canadian pipeline companies (examples: ENB, TRP).
• Canadian telecommunications companies (examples: BCE, T).
• A few major Canadian energy companies (like SU).
• Canadian utilities (examples: FTS, EMA). 

In the U.S., at the time of this post, I own BlackRock (BLK), Johnson & Johnson (JNJ), Procter & Gamble (PG) and a couple more.  

My thinking?

Basically, I buy companies that people need. People need to bank, so I own banks. People need insurance. Last time I checked people want to heat and cool their home(s) in Canada, so I own those companies too.  As you can see above, people also need waste management and smaller companies need warehousing space to thrive. So, I own those assets as well. 

How might these purchases fit into my overall investment plan?

For the curious, I continue to keep my portfolio aligned to these general rules:

• I strive to keep <30% in financials including banks. 
• I prefer to keep <20% of my overall portfolio in energy companies. That includes pipelines; DRIPping many shares of Enbridge (ENB) and TC Energy (TRP) as examples. 

You can learn all about DRIPs (Dividend Reinvestment Plans) on this dedicated page here.

• I target about 10-15% utilities overall. I like the “bond-like” income from the regulated assets most utilities own and operate. 
• I strive to keep 5-10% communications weighting, so I own stocks like Bell Canada (BCE) and Telus (T).
• Generally speaking, I try and keep any individual stock to <5% of overall portfolio value.

(You can more personal investing rules and FAQs on this page here.)

Owning my blend of individual stocks and low-cost ETFs has been a formidable 1-2 investing punch on my path to semi-retirement. Those days are getting very close thanks to the success of this plan and just plainly, sticking to it. You can do the same. 

You can read more about my financial independence update here and I look forward to providing some updates on that plan in the coming months. 

Financial Independence Update

What stocks do you have on radar for 2022?

What do you make of my picks or choices to add more of these companies to my portfolio? Any sleeper picks you have and want to share with me, or do you just want to keep that to yourself? 🙂

Thanks for reading and I look forward to your comments as always.

Mark

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