5 TSX stocks to watch as Canada’s latest inflation numbers are out

Highlights

• In Q2 2022, Loblaw’s revenue grew to C$ 12,847 million.
• In August, the TD Bank announced it would acquire Cowen Inc.
• As of July 31, 2022, Toronto-Dominion Bank’s total assets increased to C$ 1,840.8 billion.

The inflation rate cooled down to 6.9 per cent, revealed a Statistics Canada report on Wednesday, October 19. As a result, different sectors are going through different movements. Food prices continued to rise and were reported at 11.4 per cent (41-year high). High prices of natural gas and fertilizer and unfavorable weather are drivers of high prices in the sector.

In September 2022, lower gas prices led to a drop-in inflation rate. But the prices again rose in recent weeks and are tracking gains of up to 10 per cent.   

Currently, amidst the chaos, The Bank of Canada’s policy rate is 3.25 per cent. Reportedly, the bank’s rates are expected to rise further and change the game altogether.

With the rising rates and inflation, more pressure may build up around the market. It is crucial to reposition your portfolio and follow a risk mitigation strategy. Look at the market from a diversified angle and ensure to distribute your stocks accordingly. Let us have a look at some of the stocks mentioned below:

Loblaw Companies Limited (TSX: L)

Loblaw Companies Limited is a retailer that deals in segments related to general merchandise, grocery, and pharmacy. The company operates its stores in Ontario and has a presence in Quebec and British Columbia.

In Q2 2022, Loblaw Companies Limited’s revenue grew to C$ 12,847 million by C$ 356 million (2.9 per cent). The adjusted EBITDA too increased to C$ 1,499 million by C$ 128 million (9.3 per cent).

Conversely, the operating income was posted at C$ 742 million, which decreased by C$ 10 million (1.3 per cent). Retail sales and e-commerce sales had contrasting movements. The retail sales increased to C$ 12,623 million by 2.8 per cent (C$ 341 million), whereas e-commerce sales decreased by 17.5 per cent.  

Reportedly, to minimize the impact of inflation on food prices, the company has implemented a price freeze on more than 1,500 no-name brand products until January 31, 2023. This is done with a further promise to bring in more deals in the coming weeks.

Dollarama Inc. (TSX: DOL)

Dollarama Inc. is a retailer operating discount stores. The company deals in consumer products, seasonal items, and general merchandise at low fixed price points.

Normally, as inflation rises, the financial status of people may come down. Hence, this creates a dire need to procure things at a lower price. Due to inflation approaching the economy, people may prefer and look for getting products at discounted prices.

In Q2 2023, the sales for Dollarama Inc. increased to C$ 1,217.1 million by 18.2 per cent and comparable store sales too increased by 13.2 per cent. Further, EBITDA grew to C$ 369.4 million by 25.8 per cent.

In the same comparative period, net earnings increased to C$ 193.5 million from C$ 146.2 million in Q2 2022.

As of July 31, 2022, the company's net debt increased to C$ 2,119.8 million from C$ 1,815.24 million as of January 30, 2022.

RioCan Real Estate Investment Trust (TSX: REI.UN)

RioCan Real Estate Investment Trust is a real estate investment trust based in Canada that operates mixed-use properties. Further, it develops and owns retail focused portfolio. Most of the company's properties are located on Ontario and include shopping centers and mixed-use developments.  

The Operating revenue for RioCan Real Estate Investment Trust for Q2 2022 was posted at C$ 180.9 million compared to C$ 171.8 million in Q2 2021.

The net income decreased to C$ 78.5 million compared to C$ 145.27 million for the same comparable period. In contrast, the revenue increased to C$ 308.41 million against C$ 297.68 million. Meanwhile, the funds from operations (FFO) also grew to C$ 131.65 million compared to C$ 127.51 million.

The company's monthly dividend paid to the shareholders is reported to be at C$ 0.085 with a dividend yield of 5.499 per cent.

Generally, rising inflation pushes individuals in search of alternate sources of income. Hence, people may explore this and other stocks in search of passive income and support them financially.

Toronto-Dominion Bank (TSX: TD)

Toronto-Dominion Bank operates retail and wholesale banking in Canada and the US. Bank rates and bank stocks are inversely proportional. Some analysts believe that with inflation, the bank interest rates may rise and cause bank stocks to decline.

For Q3 2022, the reported net income was C$ 3,214 million, compared to C$ 3,545 million in Q3 2021. As of July 31, 2022, the company's total assets increased to C$ 1,840.8 billion compared to C$ 1,703.1 billion last year.

The quarterly dividend paid to the shareholders is C$ 0.89, and the three-year dividend growth of the company is reported at 4.95 per cent.

On August 2, 2022, the TD Bank Group announced a definitive agreement for Toronto-Dominion Bank (The) to acquire Cowen Inc.

The below graph shows the Diluted EPS paid by the company in two different quarters.

Enbridge Inc. (TSX: ENB)

Enbridge Inc. is a midstream assets owner transporting hydrocarbons across Canada and the US. The network of the company includes natural gas and regional oil sands pipeline.

As of June 30, 2022, the cash provided by operating activities grew to C$ 2,534 million compared to C$ 2,489 million at the same time of the previous year. The adjusted EBITDA increased too to C$ 3,715 million compared to C$ 3,302 million.

In the same period, the total assets for the company increased to C$ 172,816 million as against C$ 168,864 million. The cash and cash equivalents on June 30, 2022, increased to C$ 1,088 million compared to C$ 459 million on June 30, 2021.

The company’s quarterly dividend was reported at C$ 0.86  and earnings per share were C$ 2.41.

Bottom Line:

With rising inflation, the cost of goods and services is impacted, and they tend to rise. In these inflationary markets, many companies pass on the burden on the customer. There can be increasing pressure on the overall living costs of a consumer.

Hence, check the stocks before you add them to your portfolio. Analyze the stock performances and look for the companies that are on the beneficial side in this inflationary environment.

Please note, the above content constitutes a very preliminary observation based on the industry and is of limited scope without any in-depth fundamental valuation or technical analysis. Any interest in stocks or sectors should be thoroughly evaluated taking into consideration the associated risks.