Written by Daniel Da Costa at The Motley Fool Canada
The second half of the year is already well underway and anticipation for what is to come is high, especially with interest rates currently falling in Canada and soon to be cut south of the border. Higher interest rates have weighed on share prices across various sectors in recent years, so a rate cut presents a great opportunity for leading Canadian stocks to stage a significant rally by the end of 2024.
However, the reason for the current decline in interest rates is that both the economy and inflation have cooled. So while lower interest rates have a positive impact on many companies, the slowdown in the economic environment represents another risk that investors need to be aware of.
That’s why some of the top stocks to buy for the second half of 2024 are safe and reliable companies that can not only benefit from lower interest rates but also weather the storm of a deteriorating economy, especially if the soft landing policymakers are hoping for doesn’t happen.
So if you have cash left over that you want to put to use today, here are three top Canadian stocks to buy today.
A top utility stock to buy for the second half of 2024
If you want to add stocks to your portfolio that can benefit from lower interest rates and still remain stable should the economy continue to deteriorate, a high-quality utility company like Fortis (TSX:FTS) is currently one of the best buys.
As a high-dividend stock and a company that uses high levels of debt to finance its business activities, Fortis can benefit significantly from falling interest rates.
First of all, with yields falling, Fortis’ stock is likely to rise somewhat, as the dividend yield will also fall, pushing up the share price. In addition, lower interest rates mean that servicing debt will cost less in the coming years, which would increase profitability.
In addition, as a utility stock, Fortis is one of the safest and most recession-resistant companies because the company provides essential services and its operations are hardly affected by economic downturns.
So, while Fortis is still trading at its all-time high and offers a 4% dividend yield, it is certainly one of the top stocks to buy now for the second half of 2024 and beyond.
Two top infrastructure stocks
In addition to Fortis Brookfield Infrastructure Partner (TSX:BIP.UN) and Enbridge (TSX:ENB) are two other top stocks to consider buying now, for many of the same reasons as Fortis.
Both Brookfield and Enbridge provide essential services and have highly diversified business models, which mitigates risk and makes them ideal stocks to hold during an economic downturn.
Brookfield’s global portfolio of assets, including telecommunications towers, ports, railroads and more, provides a steady cash flow each quarter. At the same time, Enbridge’s operations are critical to the North American economy.
Additionally, these stocks are loaded with billions of dollars of debt to fund their operations, and both stocks also pay sizable dividends, so if interest rates fall, both Enbridge and Brookfield could see a sustained rally.
For example, Enbridge’s interest expense rose from nearly $2.7 billion to over $3.8 billion from 2021 to 2023. Similarly, Brookfield’s interest expense rose from nearly $1.5 billion in 2021 to over $2.5 billion in 2023, an increase of more than 70% in just two years.
Therefore, the profitability of these companies should improve significantly with falling interest rates and lower interest expenses.
In addition, both stocks could see a significant increase in price in the coming months as interest rates fall and yields decline.
So while you can buy Enbridge while it’s still relatively cheap and offers a yield of over 6.8%, and Brookfield Infrastructure offers a yield of over 5.4%, these two dividend growth stocks are among the top investments to not only consider now for the second half of 2024, but also hold for years to come.
The post “3 Top Stocks to Buy in the Second Half of 2024” first appeared on The Motley Fool Canada.
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Further reading
Fool contributor Daniel Da Costa holds positions in Brookfield Infrastructure Partners and Enbridge. The Motley Fool recommends Brookfield Infrastructure Partners, Enbridge, and Fortis. The Motley Fool has a disclosure policy.
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