Before the market turns around, now is a great time to buy these two stable small-cap stocks that pay dividends and have clear growth drivers.
If central banks keep raising interest rates to stop inflation, investors will stay on edge. The TSX got off to a good start in November, but this week, when the U.S. Federal Reserve announced another big rate hike (0.75%), it gave up those early gains. All eleven of the main sectors went down, but stocks in healthcare and materials fell the most.
Share prices fluctuate, sometimes wildly, because of aggressive rate hike cycles. However, despite these sector rotations, some stocks seem to be more stable. Even though healthcare is the worst-performing sector so far in 2022, Medical Facilities (TSX: DR) is up 20.2%. Martinrea International (TSX: MRE), a company that makes auto parts, is down 11.6% so far this year but made a huge 12.9% gain in one day (November 2, 2022).
Both small-cap stocks have good growth prospects and could even do better in the long run than large-cap stocks. Before the market goes up again, you might want to add one or both of these to your investment portfolio.
Healthcare stocks that do well
Medical facilities had total returns of 56% in 2020 and 38% in 2021, which is right on track. The healthcare stock is likely to give investors gains on top of the good 2.94% dividend again in 2022. This company is worth $289.2 million, and it owns high-quality surgical facilities in the United States that get good reviews.
There are specialty surgical hospitals and outpatient surgery centers in the portfolio. Medical Facilities is different because it works with physicians to run the facilities. Management says that the growing number of outpatient procedures and the growing number of older people are major growth drivers.
After the first half of 2022, President and CEO Robert O. Horror said, “Despite the uncertainty about COVID-19 and recent cost pressures, we continue to run the business in a balanced way.” “Our cash flow and balance sheet are still in good shape.”
In Q2 2022, the net income went up by 87.6% from Q2 2021 to $22.2 million. Even though labor costs and other operating costs went up during the quarter, the number of surgical cases kept going up. Volume grew by 8.1% in June alone compared to June of last year. Medical Facilities has also paid higher dividends so far this year: C$4.9 million compared to C$4.4 million for the same time last year.
Record sales
Martinrea International had great financial results for the third quarter of 2022, including record sales for the quarter. Sales for the quarter were $1.2 billion, which is a 41% increase from Q3 2021. Management says that fewer supply shortages are to blame for the big jump in sales, and Martinrea has also passed on higher costs caused by inflation to its customers.
In the same quarter (ending September 30, 2022), the net income was $35.9 million, compared to a net loss of $17.1 million the year before. Martire’s CEO, Pat D’Eramo, says that during the quarter, production volumes went up and the costs of launching new products went down. However, supply problems could still affect operations, he says.
High energy costs in Europe are also bad for the company that makes auto parts and is worth $803.9 million. Still, Martinrea hopes to keep making progress as it negotiates for higher prices to counteract the effects of inflation.
Dividend-payers
At $10.97 and $10 per share, Medical Facilities and Martinrea are priced fairly. Also, both of these small-cap stocks are stable and pay dividends. The healthcare stock has a good dividend yield of 2.94%, while the industrial stock only has a yield of 2.29%.
This is something you should know before you think about Medical Facilities Corporation.
Our market-beating analyst team just announced what they think are the 5 best stocks for investors to buy in November 2022, and Medical Facilities Corporation wasn’t on the list.
Their online investing service, Motley Fool Stock Advisor Canada, which they have been running for almost a decade, is 15 percentage points better than the TSX. And they think there are five better stocks to buy right now.
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