3 Top Stock Picks for Fundamental Investors

DH Corp. (TSX:DH), CI Financial Corp. (TSX:CIX), and Aecon Group Inc. (TSX:ARE) are undervalued and have great dividends, making them ideal investment options. Which should you buy?

| More on:
The Motley Fool
You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn moresdf

As a fundamental investor, I am always on the lookout for high-quality companies whose stocks are trading at discounted levels and have great dividends, and after a recent search of the market, I came across three very attractive opportunities. Let’s take a quick look at each to determine which would be the best fit for your portfolio.

1. DH Corp.

DH Corp. (TSX:DH) is one of the leading providers of financial technology to the world’s financial institutions, including lending, payments, enterprise, and global transaction banking solutions.

At today’s levels, its stock trades at just 14.5 times fiscal 2016’s estimated earnings per share of $2.63 and only 13.5 times fiscal 2017’s estimated earnings per share of $2.82, both of which are inexpensive compared with its five-year average price-to-earnings multiple of 26.3 and its industry average multiple of 27.1.

In addition, DH pays a quarterly dividend of $0.32 per share, or $1.28 per share annually, which gives its stock a yield of about 3.4%.

Investors should also make two notes.

First, DH has maintained its current annual dividend rate since 2013.

Second, I think its increased amount of net cash from operating activities, including its 12.3% year-over-year growth to an adjusted $2.83 per share in fiscal 2015, could allow it to announce a significant dividend hike by the end of the year.

2. CI Financial Corp.

CI Financial Corp. (TSX:CIX) is one of Canada’s largest wealth management firms and investment fund companies with over $142 billion in assets under management and advisement.

At today’s levels, its stock trades at just 13.9 times fiscal 2016’s estimated earnings per share of $2.02 and only 12.7 times fiscal 2017’s estimated earnings per share of $2.21, both of which are inexpensive compared with its five-year average price-to-earnings multiple of 19.1 and its industry average multiple of 38.9.

In addition, CI Financial pays a monthly dividend of $0.11 per share, or $1.32 per share annually, which gives its stock a yield of about 4.7%.

Investors should also make two notes.

First, CI Financial has raised its annual dividend payment for six consecutive years, and its 4.8% hike in June 2015 has it on pace for 2016 to mark the seventh consecutive year with an increase.

Second, I think the company’s increased amount of free cash flow, including its 7% year-over-year growth to $596.6 million in fiscal 2015, could allow its streak of annual dividend increases to continue going forward.

3. Aecon Group Inc.

Aecon Group Inc. (TSX:ARE) is one of the largest providers of construction and infrastructure development services in Canada.

At today’s levels, its stock trades at just 16.8 times fiscal 2016’s estimated earnings per share of $0.96 and only 14.7 times fiscal 2017’s estimated earnings per share of $1.10, both of which are inexpensive compared with its five-year average price-to-earnings multiple of 38 and its industry average multiple of 21.4.

In addition, Aecon pays a quarterly dividend of $0.115 per share, or $0.46 per share annually, which gives its stock a yield of about 2.85%.

Investors should also make two notes.

First, Aecon has raised its annual dividend payment for four consecutive years, and its recent increases, including its 15% hike in March, has it on pace for 2016 to mark the fifth consecutive year with an increase.

Second, I think the company’s very strong financial performance, including its 102% year-over-year increase in net income to an adjusted $1.03 per diluted share in fiscal 2015, and its record backlog of $3.26 billion at the conclusion of fiscal 2015 will allow its streak of annual dividend increases to continue for the next several years.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joseph Solitro has no position in any stocks mentioned.

More on Dividend Stocks

growing plant shoots on stacked coins
Dividend Stocks

5 Dividend Stocks to Buy With Yields Upwards of 5%

These five companies all earn tonnes of cash flow, making them some of the best long-term dividend stocks you can…

Read more »

funds, money, nest egg
Dividend Stocks

TFSA Investors: 3 Stocks to Start Building an Influx of Passive Income

A TFSA is the ideal registered account for passive income, as it doesn't weigh down your tax bill, and any…

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

3 of the Safest Dividend Stocks in Canada

Royal Bank of Canada stock is one of the safest TSX dividend stocks to buy. So is CT REIT and…

Read more »

Growing plant shoots on coins
Dividend Stocks

1 of the Top Canadian Growth Stocks to Buy in February 2023

Many top Canadian growth stocks represent strong underlying businesses, healthy financials, and organic growth opportunities.

Read more »

stock research, analyze data
Dividend Stocks

Wherever the Market Goes, I’m Buying These 3 TSX Stocks

Here are three TSX stocks that could outperform irrespective of the market direction.

Read more »

woman data analyze
Dividend Stocks

1 Oversold Dividend Stock (Yielding 6.5%) to Buy This Month

Here's why SmartCentres REIT (TSX:SRU.UN) is one top dividend stock that long-term investors should consider in this current market.

Read more »

IMAGE OF A NOTEBOOK WITH TFSA WRITTEN ON IT
Dividend Stocks

Better TFSA Buy: Enbridge Stock or Bank of Nova Scotia

Enbridge and Bank of Nova Scotia offer high yields for TFSA investors seeking passive income. Is one stock now undervalued?

Read more »

Golden crown on a red velvet background
Dividend Stocks

2 Top Stocks Just Became Canadian Dividend Aristocrats

These two top Canadian Dividend Aristocrats stocks are reliable companies with impressive long-term growth potential.

Read more »