Do you have $50,000 laying around that you want to invest?
If you do, then there are several good places you could put it. Of course, there are exchange traded funds (ETFs), the go-to choice for beginner investors looking for low-risk bets. Then, there are individual stocks, bonds, and other securities. The opportunities are practically unlimited. In this article, I will reveal one asset category worth investing money into.
Dividend stocks are logical assets to hold in today’s market. In general, they are cheaper than tech stocks, and cheaper stocks tend to perform better than more expensive ones in environments in which rates rise. This year, interest rates are going up, because central banks (like the Federal Reserve and the Bank of Canada) are trying to fight inflation. When interest rates rise, growth becomes less valuable, while value becomes more appealing. Many dividend stocks are also value stocks, so it pays to look into dividend stocks in environments like this one.
One dividend stock I’ve held in the past is Suncor Energy Inc (TSX:SU). This is a Canadian oil stock that sells oil and operates gas stations. It has a 4.32% dividend yield. At today’s prices, Suncor trades at:
- 6.9 times earnings.
- 1.1 times sales.
- 1.5 times book value.
- 3.9 times operating cash flow.
- 5.8 times free cash flow.
These metrics seem to suggest that Suncor Energy is extremely cheap. Now, the markets aren’t stupid: there’s a reason people are valuing SU the way it’s being valued now. Although Suncor is cheap compared to last year’s earnings, current oil prices would seem to imply that next year’s earnings won’t be anywhere near as good. Last year, when Suncor earned the sales and profits used to calculate the ratios above, oil prices were above $100 on average. Today, WTI crude is only at US$74. That won’t produce as much earnings for Suncor as last year’s oil prices did. However, Suncor paid off a lot of debt last year, which could help to boost earnings in the year ahead. So, dividend stocks like SU still have an opportunity to thrive.
Another good place to put your money today is guaranteed investment certificates (GICs). These are long-term deposits offered by banks. They are similar to treasury bills in the sense that you invest a sum of money in them, then they pay you off at maturity. You may collect the interest monthly, annually, or let it compound for an even bigger pay out at maturity.
In the past, GICs didn’t offer much return. Yields of 0.5% to 1% were commonplace. Today, however, you can get up to a 5% yield on GICs. I currently hold two GICs that yield 5%, and I’m looking to add more in the months ahead.
GICs are among the least risky assets you can buy. They are insured by the government up to $100,000, so even if the bank you’re buying from goes broke, you can still get your principal back. Are GICs boring? Maybe they are, but they’re also very low risk. So, it pays to have a little bit of your money in them â particularly in an environment like this one where you can actually get a real return on them.
The post Where to Invest $50,000 Today to Create Lasting Wealth appeared first on The Motley Fool Canada.
Before you consider Suncor Energy, you’ll want to hear this.
Our market-beating analyst team just revealed what they believe are the 5 best stocks for investors to buy in February 2023… and Suncor Energy wasn’t on the list.
The online investing service they’ve run for nearly a decade, Motley Fool Stock Advisor Canada, is beating the TSX by 22 percentage points. And right now, they think there are 5 stocks that are better buys.
* Returns as of 2/17/23
Fool contributor Andrew Button has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.