Finding the best Canadian stocks to buy, or simply learning how to buy stocks, can be a challenging endeavor.
The TSX has been known for its lackluster returns in comparison to the American markets, and in order to find profitability here at home you simply need to find the best possible Canadian stocks out of a multitude of industries.
The stock market crash has changed the definition of a top Canadian stock in 2020
In the midst of a decade long bull run, it’s easy to think you’ve got a strong appetite for risk. That is, until we hit the quickest stock market crash in history and your investment account is suddenly down 40% in a matter of weeks. Pure-growth plays, ones that have outperformed significantly during the bull run, have suffered, while stocks that pay reliable dividends have had losses somewhat cushioned. It’s critical for you to have a mix of both.
With this list of top Canadian stocks, we have a growth focus.
However, you’re going to see a lot of Canadian dividend growth stocks on this list as well. This list will have detailed research on some of the best Canadian stocks in the country, and has had a complete overhaul. We just spent over two days updating this post to remain relevant for the rest of 2020!
Using our exclusive screener here at Stocktrades Premium, I can easily weed out the solid Canadian stocks from the poor ones in terms of both growth and income, and bring the best of the best to my desktop right when I need them. This is one of the driving factors to how I earned over 38% on my TFSA in 2019.
In fact, several of these stocks were spotted and relayed to premium members before doubling in less than a year. One even gained more than 500%!
If you’re interested in grabbing these stocks right when we spot them and not when we update this list every once in a while, check out Stocktrades Premium here.
**Writer Daniel Kent is long SU, ENB, CTC-A, SHOP, TD, SIS, TFII, PKI, GOOS, PLC
Canada's Best Stocks For 2020 (Prices 15 Minute Delay)
|Stock||Price||Price Jan 1||YTD Gains||Sector|
|24. SHOP.TO||1,311.64||530.07||147.45%||Info Technology|
|19. GOOS.TO||30.72||46.39||-33.78%||Consumer Disc|
|17. GIB.A||93.07||109.43||-14.95%||Info Technology|
|16. OTEX.TO||57.72||57.65||0.12%||Info Technology|
|14. CSU.TO||1,543.71||1,273.00||21.27%||Info Technology|
|12. ATZ.TO||17.94||19.06||-5.88%||Consumer Disc|
|11. PLC.TO||26.81||29.57||-9.33%||Consumer Disc|
|8. CTC.A||129.22||139.74||-7.53%||Consumer Disc|
|7. DOL.TO||48.40||45.05||7.44%||Consumer Disc|
|4. ATD.B||44.75||41.89||6.83%||Consumer Disc|
24. Shopify (TSX:SHOP)
Shopify (TSX:SHOP) as been one of our top stocks to buy in Canada since we started publishing our top stock list. It continues to post outsized returns and has returned over 3500% since its IPO in 2015.
If not for sky-high valuations, Shopify may have been our number one stock to buy.
However, it has run-up to a point where it could cause significant volatility if the company were to come short of expectations. In just a little over a month at the time of writing, the stock has gone from $600 to $1200+.
Most investors will naturally use extreme caution investing in a stock that has had this sort of upwards trajectory, and they would not be wrong about Shopify. Right now the stock is too expensive to buy in our opinion.
So why is it on a list of the best stocks to buy in Canada then? Well, it would be a massive disservice by us to not at least list the stock so Canadians can put it on their watchlist, as this is one of the best “buy on the dip” opportunities in the country right now.
Shopify is best classified as a cloud-based, multi-channel commerce platform. This platform is used by over half a million businesses in over 175 countries. Since 2012, they have experienced over 75% merchant growth and major brands such as Canadian Tire, GE and Tesla use Shopify’s product.
The company has saw a large surge in merchant stores being set up due to COVID-19 as retailers are being forced to shut down. As such, they’re starting to head online. Whether or not these companies will stay with Shopify as long term clients or simply shut down the online stores as the economy opens remains to be seen.
Analysts say the company will grow revenue by 33% annually next year, which is an astonishing rate considering how fast they have grown already.
However, this growth rate is actually lower than its previous years of 47% or greater. There is a premium attached to this growth, as Shopify is currently trading at over 40 times book value and nearly 60 times sales.
This is an excellent company, but investors must use caution when investing at these levels. One slip up could cause a correction.
23. Exchange Income Corp (TSX:EIF)
Exchange Income Corp (TSX:EIF) provides services and equipment to companies in the aerospace industry, and has a wide variety of services.
The company provides scheduled, chartered, and emergency medivac services while also providing regional operators with aircraft, engines and other components and parts.
The company relies heavily on acquisitions to drive growth, and at times it makes several a year.
Because of its diverse portfolio of services, it should be able to withstand harsh economic climates.
The company generates a significant portion of its revenue from government related contracts.
This can be a benefit or a downfall, depending on how you look at it. Governments like to spend, but there is also the chance new political intervention could cause costs to be cut.
In this case however, we think Exchange Income Corp will perform fine. One of the best parts about the stock is its lucrative dividend. Which by the way, in an economy with significantly more dividend cuts than raises, Exchange Income Corp has maintained its dividend.
The company has a nine-year dividend growth streak, and the five-year dividend growth rate is ~6%.
The company currently pays a safe and reliable dividend north of 6 percent which makes it an attractive income stock. Another note, the Canadian company pays dividends on a monthly basis.
A lot of Canadian investors want to play contrarian during this pandemic and invest in airline companies. If you are one of these investors, EIF may be worth a look.
22. Parkland Fuels (TSX:PKI)
Parkland Fuels (TSX:PKI) is Canada’s largest and one of North America’s fastest independent marketers of fuel and petroleum products. The company’s growth is primarily driven through acquisitions and is evident by its purchase of Chevron Canada’s Downstream fuel business making them the sole distributor for Chevron branded fuels.
Parkland has been growing at an impressive pace, and its ability to make synergistic acquisitions is paying off in the form of dividend growth and stock appreciation. The company is a Canadian Dividend Aristocrat, having raised dividends for seven consecutive years.
With a yield of 3.80% and a payout ratio of only 46% its dividend is healthy and growing.
The oil and gas bear market and COVID-19 caused the company’s share price to dip to levels below $20. Pakrland hadn’t seen share price levels like this since 2013, and investors jumped on the opportunity to grab this excellent monthly dividend payer. Since its low point during the stock market crash, the company has almost doubled.
Analysts expect Parkland’s earnings to shrink substantially this year because of COVID-19. As such, the company sits with a negative PEG ratio. However, we do not expect this to last, and once people get moving again, Parkland’s top and bottom lines should recover.
Will earnings go back to pre-COVID levels? It is hard to say right now. But with the company trading at only 22 times trailing earnings if it does, all things considered it’s trading at a discount.
This is a company that has increased its bottom line by over 800% from 2016-2019. Canadian investors should be willing to overlook short-term headwinds for that kind of growth. And keep in mind, this doesn’t even include the dividend.
Analysts are still bullish on the fuel distributor and are expecting double-digit upside in terms of share price. It has been very aggressive and buying up whatever it can get its hands on.
21. Heroux Devtek (TSX:HRX)
Heroux Devtek (TSX:HRX) is a fairly interesting Canadian stock. For one, it operates in the airline industry but not in the way you may think.
The company does not deal with passengers, it deals with the automation and landing gear of aircraft.
Although the stock is considered relatively small by Canadian standards with a market cap of just over $360 million, Heroux Devtek is the third largest landing gear company in the world.
The most important aspect of the company is its contracts, particularly those with the United States military.
I think its public knowledge that the United States loves to spend money on defense.
Case in point, Donald Trump stated the US Military budget in 2020 will be north of $720 billion.
Heroux Devtek recently inked a contract to produce landing gear for their C-130H Super Hercules aircraft that began in 2020.
The company had a great run, returning 68% over the course of a year right before the crash.
However, with airline companies at a standstill, Heroux Devtek has taken significant damage in terms of stock price. The stock has lost over 50% of its value and is currently trading at only 10 times trailing earnings.
It is important to keep in mind that passenger and business travel will continue to suffer as we move forward post-pandemic. In fact, Air Canada said it could take 3 years for earnings to return to 2019 levels.
Less travel means less landing gear for Heroux Devtek to make, and we expect top and bottom lines to suffer. However, we feel the sell of may be overdone, as the company currently attributes over 54% of revenue to defense spending.
This will no doubt cushion the blow to Heroux Devtek, and we expect the company will not only survive this but excel in the future. Keep in mind, a recovery may take years and this is a long term stock.
20. Savaria (TSX:SIS)
Savaria (TSX:SIS) is a newcomer on our list of the best Canadian stocks, and for good reason.
The company is projected to post impressive growth numbers in an industry that is growing exponentially.
Savaria provides a range of mobility related products such as stairlifts, platform lifts and elevators.
It’s no secret the Canadian population is getting older. In fact, by 2030, the Government of Canada estimates those aged 65 years or older will represent 23% of the population. This is nearly 50% higher than today’s numbers.
The company’s stock price has been somewhat weighed down by weak earning reports and share offerings, but do not let short term disappointments cloud your judgement of a long-term investment.
The company is starting to recover and is trading at somewhat of a premium, 26 times forward earnings and a price to book of 2.51.
19. Canada Goose (TSX:GOOS)
Canada Goose (TSX:GOOS) is quickly becoming one of Canada’s best stocks to buy, mainly because of its prestigious brand recognition and the fact it has turned its ridiculously expensive parkas into a must have fashion.
The more expensive your product, the stronger the brand you need to push it.
What is particularly attractive about the company is that its parkas are quickly becoming a status symbol worldwide, especially in China. The company has recently opened stores in Boston and Tokyo, further expanding its worldwide footprint.
Unfortunately, Canada Goose’s stock has struggled. In 2019, it lost 21% of its value, and it is a trend that has continued in early 2020 with the company losing 34.5%.
COVID-19 has left Canadian investors with an excellent opportunity to get into one of Canada’s best growth stocks at an excellent price. COVID-19 and the unrest in Hong Kong are temporary headwinds, and when these issues subside, the company can continue its accelerated growth in a country that is in very high demand of the product, China.
Canada Goose hasn’t missed analyst estimates in both sales and earnings in a single quarter since its IPO. It is trading at only 20 times forward earnings and has PEG ratio of 1.17, the lowest in its history.
If the company can increase its online presence, it will have a positive effect on both its sales volume and profit margins.
According to Canada Goose, jackets sold online result in 2 to 4 times more operating income.
Analysts have placed a one-year target estimate on the company of $41.45, which indicates nearly 45% upside.
18. Enbridge (TSX:ENB)
Enbridge (TSX:ENB) currently operates the longest pipeline in North America.
In 2017, the company merged with Spectra to create an energy infrastructure company. About 2/3 of Enbridge’s earnings are generated through oil sands (liquid pipeline) distribution while the other 1/3 come from natural gas transmission.
The company currently has 10 projects on the book through 2022 worth more than $11 billion. A good majority of Enbridge’s growth prospects are tied to the Line 3 Expansion project.
The pipeline is expected to be in operation in 2021, but recently issues have been raised by the Minnesota government, saying Enbridge failed to submit a long-range forecast for demand of product the company plans to ship.
It seems common place these days for a pipeline to be disputed. However, we have full confidence the Line 3 Expansion will be completed eventually.
Enbridge is typically held by investors looking to collect a handsome dividend, and right now the company is yielding 7.37%. The company has a dividend growth streak of 24-years and is expected to grow the dividend by 5-7% annually – inline with distributable cash flow growth.
The stock is extremely popular in Canadian ETFs, and is widely regarded as one of the best Canadian stocks to own for income.
COVID-19 has wreaked havoc on the oil markets, but a lot of investors are painting pipelines with the same brush. Keep in mind, pipelines are less reliant on the price of oil, as the companies typically have long term take-or-pay contracts where the company gets paid regardless of product shipped.
17. CGI Inc (TSX:GIB.A)
CGI Group (TSX:GIB.A) is Canada’s largest technology outsourcing company, and easily one of the best Canadian stocks to buy today. The company focuses on the management of IT services and integration and sales of software solutions for businesses.
A global company, CGI operates in multiple regions of the world including North America, Europe and Asia.
For companies that sell services and not physical products, it is very important to look at a company’s backlog and book to bill ratio.
This is because CGI Group relies heavily on contract income to drive revenue and growth. The company is seeing healthy bookings growth, and its book to bill ratio of 97% is showing there is still a lot of demand for the product.
CGI has grown earnings by 10% annually and has achieved a CAGR (compound annual growth rate) of nearly 20%. CGI’s goal is to double in size over the next 5 years, and its CAGR is right in line to do so.
The Canadian tech company is one of the best stocks to buy in Canada as it is trading at a discount relative to its peers, with forward price to earnings coming in at 18 and a price to book of just under 3. When you consider companies like Kinaxis (trading at over 100 times forward earnings) and Shopify (trading at over 40 times book value), CGI is a great option right now.
COVID-19 caused CGI to take a hit to its stock price, and it hasn’t recovered as well as other tech stocks. The company is holding up well all things considered, and if investors are looking for other tech options that aren’t as expensive, this one is worth a look.
16. Opentext (TSX:OTEX)
Open Text (TSX:OTEX) is a software development company that specializes in providing Information Management Software. The company is a leader in an industry that is growing at a rapid pace. Businesses use to think of data services as a luxury, but they are now quickly becoming a necessity.
Last year, Open Text entered agreements with Google’s cloud division and Mastercard. Its partnership with Google will allow its applications to be available on Google’s cloud-based system, and to be integrated with popular applications such as Google Sheets and Google Drive.
Its deal with Mastercard is a partnership moving forward to increase the efficiency of the payment and financing sections in the automobile industry.
Open Text has spent over $2.2 billion on acquisitions in the last 3 years and it is the primary driver for its growth.
Because the tech industry is spread so thin, an investor will need to keep an eye on the company to make sure it isn’t overpaying for acquisitions because of highly competitive bidding wars.
Recently, it closed on one of its larger acquisitions– the $1.45 billion deal for Carbonite which is expected to be materially accretive to cloud revenues, margins and adjusted EBITDA.
With expectations of 12.18% annual growth next year and a five-year dividend growth rate of 15.10%, Open Text is one of the best technology stocks, and one of the best overall stocks to buy in Canada.
It’s important to keep in mind however that these expectations and dividend growth rate may be lowered due to COVID-19. Tech stocks are performing well, but there is no doubt the pandemic will hurt top and bottom lines of the large majority of companies.
The key thing moving forward will be to see if OpenText, who has raised dividends for 7 straight years, keeps the streak alive.
15. Boyd Group Services (TSX:BYD)
Boyd Group recently converted from an open ended mutual fund trust to a corporation. It operates in the automotive industry, particularly automotive and glass repair. The company operates in five Canadian provinces and over 25 states.
Over the past year, the stock has gained 24% and it has been one of the best performing stocks on the TSX Index. Over the past five years, it has returned nearly 400% and it is the second-best performing Canadian stock of the last decade with returns north of 4,000%!
During the stock market crash in 2020, the high-flying Canadian growth stock performed admiringly well. Year to date it’s actually up just shy of 1%, outperforming the TSX significantly. The Canadian auto-glass company’s stock took a nose dive during the crash, but Canadian investors quickly realized it was overblown, and it has now recovered.
The reason for Boyd being surviving the crash relatively unscathed is simply the fact that regardless of economic conditions, vehicle repairs are being made. Most auto collision repairs are paid for via insurance claims, which provides a steady stream of revenue.
Boyd has a knack for buying up small time shops, renovating them and reducing their expenses and then slapping its brand on the store. This has proven to be extremely lucrative for the company, and I would expect larger expansions moving forward.
The company could also be seeing easier purchasing prices as smaller businesses struggle to keep their doors open. This is a harsh reality, but one that Boyd could benefit from.
Boyd is one of the largest Canadian companies in the auto industry, and as such analysts expect big growth moving forward. With a compound annual growth rate on earnings of more than 30% in the last half decade, it’s easy to get where they are coming from.
Boyd is slated to grow revenue by 23.5% over the next year. The company pays a dividend, but it won’t be one to excite most Canadian income investors. With a yield of 0.28%, glass half empty investors will think the yield is too small. Glass half full investors however, especially with the company’s 13 year growth streak, will see room to run in the dividend.
14. Constellation Software (TSX:CSU)
Constellation Software (TSX:CSU) specializes in acquiring, managing, and building vertical market software businesses.
The company is by far the largest priced TSX tech stock and one of the most expensive stocks on the TSX as a whole. This ends up turning a lot of new investors away.
Trading at over $1600 a share, it is a tough pill to swallow. Most investors shift towards stocks that they can buy multiples of.
However, the company has been on a tear as of late and has returned 27% to investors in 2020. When you first look at this number, it doesn’t give that “wow” factor. But when you consider we just went through the fastest stock market crash in history, it’s very impressive.
The company is trading at a premium, 34 times forward earnings and 44 times book value.
However, the company’s two-year PEG, even with this latest run up still sits at only 1.13.
Patient investors may be wise to wait for a dip in price and snatch up some shares (or a single if its all you can afford) of Constellation.
Don’t wait too long, the company’s share price has been deemed ‘expensive’ for the better part of the past five years and it is still hitting new highs on yearly basis.
13. Kirkland Lake (TSX:KL)
Kirkland Lake (TSX:KL) has been nothing short of a star performer.
The Canadian mid tier gold mining company posted yet another solid year and its share price gained another 60% in 2019. The stock was sold off during the market crash due to COVID-19, but has since recovered on escalating gold prices, which could be headed even higher.
Of note, if you’re interested in other gold companies, we’ve got a great list of the best Canadian gold stocks.
Most investors tend to stay away from Canadian gold companies, typically due to their volatility and fluctuation production.
However, Kirkland has been able to provide solid numbers for some time now. The company is continually looking to reduce costs and improve revenue. And with a surging price of gold, now may be a good time to buy this Canadian mining stock.
Kirkland Lake recently made waves when it made an office to acquire Detour Gold. Detour owns and operates one of the most attractive single-mine asset in North America. The deal has now closed, and the primary issue with the acquisition was the fact that all-in-sustaining-costs would be higher.
There is no doubt the acquisition of Detour will push costs higher. However, the recent increase in gold has already made up for costs and then some. We approve of the acquisition in every way.
Analysts have double-digit upside in their one-year price target of $63.74 per share. Kirkland has consistently beat earnings estimates and has proven to be a best-in-class gold producer.
We believe every Canadian investor’s portfolio should have exposure to gold. However, it is extremely hard to value and analyze these companies. So, we tend to suggest sticking to major producers like Kirkland.
12. Aritzia (TSX:ATZ)
Aritzia (TSX:ATZ) is a women’s only fashion company that designs, develops and sells fashion products.
The company currently operates over 90 stores in North America, which includes a 14 000 square foot shop in New York City.
Aritzia is confident in its ability to provide double-digit growth numbers, and it points to its e-commerce dedication to achieve that growth.
With fashion, there is always the risk that a style will simply “fade” away. That is why it is especially important to invest in retail companies like Aritzia and Canada Goose, who have shown the ability to adapt and overcome trending fashions to stay relevant.
Aritzia has been a model company in terms of meeting expectations.
It has consistently beat on both the top and bottom-line expectations.
Analysts have high hopes for the company and expect it to grow earnings by over 100% next year.
Why such high targets? Well, this is more than likely due to the amount of money the COVID-19 lockdown is expected to cost the company in 2020.
With retail being one of the hardest hit industries in the world, many will not survive. It is unheard of to see this drastic of a drop in revenue in such a short amount of time, and stores which had little Ecommerce presence or were in poor financial health will struggle.
As we mentioned above, we would expect Aritzia to survive the pandemic due to strong Ecommerce growth. However, we will need to see how the company does in the second quarter, one that will have full COVID-19 implications, to see.
If the company can continue to grow online sales and stay ahead of fashion trends, there is no reason to believe Aritzia won’t hit growth targets, and is one of the best retail companies in North America.
11. Park Lawn Corp (TSX:PLC)
Park Lawn (TSX:PLC) specializes in memorialization, cemetery and funeral industry products and services. Park Lawn is the only Canadian funeral service that is publicly listed, and the company owns more than 140 acres of land and 40 years of available inventory.
What makes Park Lawn so hard to resist is the fact that death is truly something we can’t avoid, and we typically want to see our loved ones laid to rest appropriately, and are willing to spend a little extra money to do so.
Park Lawn has been going at a rapid pace. The company issued its IPO in 2011 and has since returned over 500% to investors. Starting out with only 6 cemeteries and 3 crematoria Park Lawn has expanded to over 150 locations today.
Analysts expect the company will grow earnings by 33% next year, and have placed a one-year target price of $29.07 per share that implies over 30% upside.
Park Lawn has a strong history of meeting or exceeded earnings expectations and it currently pays a 2.01% dividend yield. It will be important to keep an eye on the dividend, as its payout ratio currently sits at over 100% of the company’s free cash flows.
Overall, in terms of Canadian stocks to buy, Park Lawn Corp is one of the best.
Our top 10 Canadian stocks to purchase in 2020:
10. Manulife Financial (TSX:MFC)
Manulife Financial (MFC.TO) is one of Canada’s largest insurance companies.
Lower interest rates have caused the insurance giant to lag the TSX significantly in terms of recovery. And this is because of a few things.
For one, the company invests premiums to generate revenue. When interest rates are lower, they will make less on invested premiums.
Secondly, the company sells insurance and products that rely on the current interest rates, take annuities as an example. With interest rates collapsing due to COVID-19, these products just aren’t attractive right now.
The dividend is well covered by operating cash flows, using up only 9%.
The company currently yields nearly 7%, and analysts expect Manulife to grow around 12% next year. Analysts currently have a target price that indicates over 67% upside.
Current holders, prospective investors and analysts are hoping for a quick recovery of the economy so Manulife can get back to business as usual.
This is a great stock trading at a significant discount compared to past earnings (5.84 times trailing earnings) and those who are patient enough can sit back and collect the dividend while waiting for the economy to recover.
9. Goeasy Ltd (TSX:GSY)
Goeasy Ltd (TSX:GSY), a small-cap Canadian stock, is a full-service provider of goods and alternative financial services. It operates in two segments: easyfinancial and easyhome. Although easyhome has been profitable and continues to grow, the company’s real growth prospects are found within its easyfinancial portfolio.
Last year, it made strategic decisions to enter the Quebec market and to enter a new financial lending sector. The company has increased its loan range from $500-$15,000 to loans of $15,000 to $30,000, which is a $18 billion dollar market.
Where Goeasy differs from most financial institutions is its ability to lend to those who may have been shut down by a bank. This is because the company is not forced to follow strict regulations placed on major Canadian financial institutions.
With mortgage lending tightening up, this will surely lead to a bigger customer base. It is one of the fastest growing companies in Canada and was nominated to the inaugural TSX 30.
Goeasy has provided stable and consistent earnings by matching or exceeding analysts expectations on a regular basis. Analysts expect the company to grow by 35% over the next year and the stock is rated a consensus “buy”.
It’s important to remember however that historical valuation metrics and analyst ratings may be based on historical numbers. We expect earnings and dividend growth to slow, but that doesn’t mean Goeasy isn’t an excellent stock.
Goeasy took a dive share price wise when the market crash hit as alternative lenders are deemed “riskier” than typical lenders. This is because during economic downturns, high risk lenders who were rejected by major banks may default on payments due to unemployment or financial hardship.
However, the company stated that it could operate profitably at significantly higher delinquency rates than it has right now, and investor confidence seems to have returned, with its stock price accelerating at the time of writing.
8. Canadian Tire (TSX:CTC.A)
Canadian Tire (TSX:CTC.A) has been a Canadian staple. It is one of Canada’s biggest retail chains in recent history. Canadian Tire has over 1698 stores across Canada, including popular brands such as Marks Work Warehouse.
One key difference that separates the company from other retailers is its ability to prevail as a brick and mortar retailer in the face of an online boom.
The company’s branding strategy, along with key acquisitions of companies mentioned above like Marks and Helly Hanson have helped the retailer continue to bring people into its stores.
People are not ordering tires or appliances online, and they generally like to try on expensive clothing prior to buying. Its Mastercraft brand provides cheap power and hand tools to consumers not looking to spend a fortune, and technological advancements in the company’s product department have been proven key to getting people into the stores and buying from them instead of online giants like Amazon.
Keep in mind that COVID-19 is going to have a drastic effect on the company. In its most recent quarter, the company posted a loss of $1.13 a share, and attributed $0.93 of that loss to COVID-19 headwinds. Although temporary, there is no questioning Canadian Tire is going to struggle in the short term.
Analysts like what they see in Canadian Tire and have placed a one-year target price of $161, which works out to 60% upside on the retail giant.
Combine that with a 4.46% dividend yield and a five-year dividend growth rate of over 17% and Canadian Tire is a Canadian stock you need to be looking at.
7. Dollarama (TSX:DOL)
Dollarama (TSX:DOL) was at one point one of the hottest stocks to own in Canada. With surging growth, it seemed like there was nothing that could stop the company. Although growth has slowed, it still presents investors with attractive growth opportunities.
The company is expected to grow by double-digits in both sales and revenue over the next five- years and is trading at 23 times earnings and 3.8 times book value. The company is expensive, but with double digit growth estimates it’s not outrageous.
And there is one reason in particular Dollarama has saw a boost in its ranking on this mid year update of the best Canadian stocks, and that is COVID-19.
With Dollarama being a discount store, we can expect revenue and earnings to stay relatively stable as shoppers will still go to the stores for every day needs. In fact, there is a chance that more shoppers could come to Dollarama, considering they will be looking to pinch pennies in the upcoming recession.
Analysts are bullish on the discount retailer with 9 “buys” and 2 “strong buys” and have an average one-year price target of $50.25 per share.
Thus far, it has stemmed the tide of increased competition and has even started to take chunks of business for traditional grocery stores.
6. TFI International (TSX:TFII)
TFI International (TSX:TFII) is a trucking and logistics company. The company operates in four segments: Package and Courier, Less-Than-Truckload, Truckload and Logistics. The company has over 400 terminals across North America.
The company has posted blowout earnings and sales numbers and records with every passing quarter.
The company is trading at a deep discount. Trading at only 14 times forward earnings, a five-year PEG of 0.53 and a price to book of only 2.19, its easy to see why analysts have placed over 20% upside on the Canadian trucking company.
If TFI continues to produce at the rate it is, an investment in the company will inevitably pay off. There was one point where TFII had taken a significant hit to its share price, which didn’t make much sense as trucking companies were still full steam ahead, regardless of the COVID-19 pandemic.
The stocks fall and subsequent rise in stock price just shows you how irrational the markets can be at times. Analysts expect earnings to shrink by up to 30% this year and then grow 35% in 2021.
TFI is a Canadian Dividend Aristocrat, raising dividends for nine straight years. The company has a yield of 2.59% at the time of writing at a five-year dividend growth rate of 10%. This is one of the fastest growing 5 year rates of all Dividend Aristocrats.
5. Intact Financial (TSX:IFC)
Intact Financial (TSX:IFC) is one of Canada’s lesser known insurance companies.
The company specializes in P&C insurance offering a range of car, home and business insurance products.
The company has close to $10 billion in annual direct premiums and an estimated market share of nearly 20%.
The company has achieved double-digit growth over the past five years and is a Canadian Dividend Aristocrat, raising dividends for 15 straight years. The company’s dividend yield is well covered by cash flows, coming in at only 13% of free cash flow.
During this COVID-19 pandemic, the company states that 99% of its employees are currently working at home, and they have kept their services to pre-crisis levels. If anything, this highlights that it is business as usual in terms of customers for the insurance giant.
In the first quarter of 2020, Intact saw in increase of 14% on premiums written and a 14% return on equity.
The company has targeted net operating income growth of 10% annually, and with a forward price to earnings of only 16.30 and a two-year PEG of 0.80, it is trading at a discount like most insurance companies.
Analysts are not as bullish as we are on the Canadian insurance company with a one-year price target that implies flat growth.
It was the same issue last year, yet Intact delivered 42% growth in 2019. We are of the same opinion we had last year – Intact Financial is one of the best Canadian stocks to own today.
4. Alimentation Couche-Tard (TSX:ATD.B)
Alimentation Couche-Tard (TSX:ATD-B) is the largest convenience store operator in Canada and the second largest in North America. While constantly expanding its presence in the US and Europe, it successfully built a convenience store including daily use products. Many stores are also combined with fuel service stations. ATD operates 12,575 stores (9,794 in North America, Europe and Russia, and 2,150 in other international markets.)
The company’s main strength lies in its ability to acquire and integrate convenience stores in Canada and across the world and shape them almost instantly with its own branding. Couche-Tard is not buying other stores to face the competition or because management needs to follow the parade.
In fact, ATD IS the parade. It is the leader in the market and dictates its vision. The stock has provided strong growth to Canadian investors and is a very reliable option in times of economic uncertainty.
Revenue in the convenience store area stays steady during recessions, as people still do need gasoline and buy frequent items such as cigarettes, lottery tickets and snack foods. This makes Couche-Tard one of the best Canadian stocks to by, especially considering the current conditions.
The stock is trading at 19.5 times forward earnings and analysts figure earnings could increase by 21% next year. This is a very promising number to an already promising Canadian stock.
However, if we look at the company’s PEG of 2.01, it is key to note that some of this growth seems to already be priced into the stock.
Couche-Tard could be considered a buy on the dip candidate, or investors who don’t like to time the market would probably still be comfortable purchasing at these levels.
Couche-Tard has an excellent dividend, albeit a small yield. The company recently hit a decade of consistent dividend increases and has a yield of around 0.71%. With a payout ratio of 10.28% and the dividend growing at a 25.10% annually over the last 5 years, this is the perfect stock for dividend growth investors.
3. Cascades (TSX:CAS)
Cascades (TSX:CAS) produces, converts and markets packing and tissue products consisting of recycled fibers. The company operates through four segments: Containerboard, Boxboard Europe, Packing Products and Tissue Papers.
As the world moves towards a cleaner, greener approach, it is good to note that Cascade’s products are made up of 80% recycled products and 42% of its energy use is from renewable sources.
It uses 2.7x less energy and 4.0x less water than industry averages, and young investors who are looking for socially responsible companies to invest in may be intrigued by Cascades.
Cascades, with it being a paper company has stood up relatively well during the pandemic, with the stock up nearly 24% year to date. This is a significant outperformance when compared to the benchmark TSX.
The reason the stock made our best Canadian stocks list is simply because its value. Currently, the stock is trading at only 12 times forward earnings and has a PEG of only 0.9. To add to this, the company is trading at only 0.73 times book and 0.23 times sales.
On top of this, the Canadian company also pays a respectable dividend of 2.35%, one that is well covered in terms of payout as well, making up only 32% of free cash flows.
2. TD Bank (TSX:TD)
TD Bank (TSX:TD) is one of the strongest stocks to buy in Canada, mainly because of its Big 5 status.
One of the biggest banks in the country, the company has a market cap of over $100 billion and is one of the best paying dividend stocks in the country.
The stock provides international exposure, with 40% of its overall revenues coming from the United States.
As a result, TD Bank does not face as heavy of exposure to Canadian interest rates like other Canadian Banks.
In fact, the company has benefited from a reduction in corporate tax rates in the US last and will be able to take advantage of a US economy that is supposed to get back on track quickly as they start to re-open after a COVID-19 lockdown.
Because TD has one of the best dividends in the country, you often pay a premium for the stock.
The key thing to note is the stock is only trading at 11.5 times forward earnings and a price to book of 1.21, one of the lowest of its peers.
As of writing, it is trading at a double-digit discount to historical averages, only the third time in the past decade it has been this cheap.
The reason for this is simply due to the uncertainty in the Canadian and North American economy. The true effects of COVID-19 are generally unknown, and it will probably take the majority of 2020 to truly figure that out.
As mortgages continue to be deferred and interest rates at significant lows, TD may struggle moving forward in the short term. But make no mistake about it, this is a blue-chip giant that is trading at very promising price points.
TD Bank offers a starting dividend yield of 5.62% and has one of the lowest payout ratios in the industry (44%).
Combined with an industry-leading dividend growth rate (~10%) and you have one of the top Canadian stocks to buy for both value and income.
1. Equitable Group (TSX:EQB)
Equitable Group (TSX:EQB) is Canadian alternative lender that provides loans and mortgage solutions.
What we like the most about Equitable Bank is that they are truly a triple threat in terms of Canadian stocks.
They provide excellent growth, a solid dividend, and after the drastic fall due to the pandemic, amazing value.
People are flocking to alternative lenders, especially those that offer mortgage solutions, because the Canadian stress test that the major financial institutions must follow is reducing purchaser’s buying power by up to $70,000.
Even though there is a good chance restrictions are eased, there is little chance they will simply go away any time soon.
The company is currently trading at a deep discount, with a forward price to earnings of only 5.96, a price to book of 0.69 and a five-year PEG of only 0.28.
There is a substantial amount of growth not priced into this stock, and analysts expect the company to grow at a rate of 24.4% annually over the next 5 years.
We expect the company to not hit these growth levels over the next few years as the economy struggles due to the COVID-19 pandemic and shutdown, but long term forecasts are very promising.
Not to mention, they have one of the best dividends in the country.
Equitable currently has a dividend yield of 2.59%, a five-year dividend growth rate of 14% and a nine-year dividend growth streak.
In fact, the company has raised its dividend for six straight quarters. That’s right, quarters, not years!
Now, we can expect this growth to slow as the company will look to tighten up financially and brace for an inevitable recession. But as we reiterated above, we’re bullish on EQB for the long term.
If you believe in the alternative lending industry and can look past the negative stigmas associated with it, then Equitable Group and our next stock GoEasy Ltd are some of the best Canadian stocks to own in a growing industry.