If you’ve ever played poker, you might know how painful it is to lose those high-value blue chips to an opponent.
Thankfully, the blue chips I prefer are much less likely to flow away from my hands (or, more precisely, my investment portfolio) with one careless bet.
The blue-chip stock “bets” are significantly safer, and they are more likely to pay out in the long term.
If you, like me, want to fortify your investment portfolio with them, this list of best Canadian blue-chip stocks can help you get started.
What Is A Blue Chip Stock?
There isn’t a well-defined criterion by which we define blue-chip stocks, but there are some markers that help investors identify blue-chip stocks:
- A well-established company, an industry leader, and a leader in its business segment (at least in the country).
- Market capitalization in billions (some set the threshold at $10 billion, but it’s not a common practice).
- A decent dividend history.
- A household name that everyone recognizes. Though it doesn’t translate well for all industries and niches, so a name that almost everyone associated with the industry recognizes.
Thanks to their position in the industry, significant assets, and a solid history of returns, blue-chip stocks are considered among some of the safest stocks there are. But they are not infallible. They still carry the risk inherent with all stock investments, but they are as safe as stocks can get. Blue-chip stocks can be a powerful addition to your portfolio for long-term gains.
Best Canadian Blue Chip Stocks
We’ve chosen the blue-chip stocks for this list and arranged them in the following order based on these factors: Position in the industry, history of returns (10-year CAGR), market capitalization, dividend yield, and future growth prospects.
1. Royal Bank of Canada Stock
Dividend Yield: 4.09%
Market Cap: $150.36 billion
Royal Bank of Canada is the leader in the banking sector. This 156-year financial institution is the largest bank in the country by assets and market capitalization and the second largest security on the stock exchange.
Though its primary market is local (with over 1,200 branches), it operates in 36 countries and has over 17 million clients. It has increased its payouts for nine consecutive years, becoming an aristocrat.
The 10-year CAGR is 11.59%, and if the bank can keep it up, it can contribute a lot to your long-term gains. It’s making great strides towards online banking as well and is likely to hold its dominant position in the digital banking sphere as well.
2. Fortis Stock
Dividend Yield: 3.85%
Market Cap: $31.3 billion
Fortis is the largest utility stock in the country by market cap and the second-oldest dividend aristocrat in TSX. It operates in 10 countries, but the majority of its assets and consumer base is in the country and in the US.
With its 2.2 million electric and 1.1 million gas customers paying their bills, the company has a very strong revenue source. The company is also preparing for a green future and developing clean energy assets, so it would likely be ready when government policies or consumer-sentiment shift expedites the conversion to green energy.
This is an important point to take into account if you are going to hold one of the best Canadian blue-chip stocks in your portfolio.
3. BCE Stock
Dividend Yield: 5.79%
Market Cap: $66.6 billion
The 37-year telecom giant is the leader in its sector and the largest security by market cap. BCE, along with Telus and Rogers, dominate 90% of the market, so there is little competition. It has been a dividend aristocrat for over a decade, and its current 10-year CAGR is 10.6%.
With the right steps towards 5G (Which the company has already taken), it might keep growing for decades. It has a powerful balance sheet, a plethora of assets and several brands under its umbrella that are household names (which ticks another blue-chip box). Try adding it to your portfolio when the stock is undervalued, and the yield is high.
4. Canadian National Railway Stock
Dividend Yield: 1.65%
Market Cap: $126.9 billion
Canadian National Railway is a literal giant in transportation. This century-old company is the largest railway in the country and has a dominant position in both cargo and passenger transportation.
It owns and operates a 2,000-mile extensive railroad network and connects three coasts, marking its logistical dominance.
This blue-chip stock also happens to be a 24-year-old aristocrat, and while its yield isn’t very attractive, it’s capital growth potential certainly is. With a 10-year CAGR of 17.39%, it can (theoretically) turn a $1,000 investment into an over $100,000 nest egg in three decades. Railroads are unlikely to go out of commission anytime soon.
5. Granite REIT Stock
Dividend Yield: 3.85%
Market Cap: $5.96 billion
Granite isn’t the largest real estate stock currently available on the TSX. It’s not even the largest REIT, but it is the oldest aristocrat in the sector and has increased its dividends for nine consecutive years.
It also offers a decent enough yield and has a powerful 10-year CAGR of 21.8%. The REIT is only 22 years old, but it has grown quite substantially in that time and established itself as a market leader. The REIT focuses on industrial and logistic properties and has a portfolio of 109 properties in eight different countries with a 99% occupation rate.
6. Algonquin Power & Utilities Stock
Dividend Yield: 3.89%
Market Cap: $12.2 billion
Algonquin is a leader in the green energy sector and the second-largest security in the independent power production industry. This 32-year-old company has been raising its dividends for the past nine years (and at quite a generous place).
This is one of the few companies that are well-poised for the future, and a stronger push towards green energy can turn this company into a national leader in utility and power production.
It has a decent consumer-base (636,000 gas and electricity connections) and about $11 billion worth of assets. The powerful 21% CAGR makes it a very desirable blue-chip growth stock.
7. Metro Stock
Dividend Yield: 1.5%
Market Cap: $18.9 billion
Metro is one of those household names that everyone recognizes. It’s also one of the oldest aristocrats on this list, with over 25 years of dividend increases.
Still, if you consider its current yield, the growth of its dividends might not be the prime reason to hold this stock in your portfolio; the capital growth prospect is. The 10-year CAGR of 16% might not be as high as many others on this list, but it’s still quite sizeable.
The safety and long-term stability of this stock are tied to more than just the blue-chip status. It’s a consumer staple stock that relies quite heavily on the ever-green business of groceries and pharmacy.
8. Constellation Software Stock
Dividend Yield: 0.31%
Market Cap: $34.5 billion
Constellation Software is a 25-year-old leader in the tech sector and the second-largest software company by market cap. It’s a diversified software company that focuses on acquiring a diverse array of profitable assets and holding them long-term.
In its 25 years, the company has acquired over a hundred companies. Right now, it has six. Through these companies, Constellation has a network of 125,000 customers in over 100 companies.
The balance sheet of the company is strong since it’s not concentrating on any one particular sub-industry in the software market; its future growth looks promising. It’s usually overpriced, but it’s understandable if we consider its 10-year CAGR of 44.7%.
9. Toromont Industries Stock
Dividend Yield: 1.35%
Market Cap: $9.6 billion
Toromont is a 59-year company, a leader in the industrial equipment and heavy machinery business, and an aristocrat of 30 years. It’s also a decent growth stock. The company has two major segments, an equipment group and a refrigeration group.
Both are asset-heavy businesses. Its 10-year CAGR is 19.45%, and even if the yield is barely modest, it’s constantly growing. Toromont has a strong history, and since the mechanical heavy industry is likely to stay relevant for a long time, Toromont might have a strong future ahead of it. The diversification of business is also in favor of the company since if one of its arms starts to weaken, it can focus on another.
10. Brookfield Asset Management Stock
Dividend Yield: 1.15%
Market Cap: $81.26 billion
Brookfield Asset Management is one of the largest asset management companies in the country. This Toronto-based company is 120 years old and has assets in thirty different countries. Total assets under management right now are $575 billion and spanned across various sectors.
This diversified portfolio, a solid history of successful asset management (and creating value for their shareholders), and powerful growth history make it a compelling pick for your portfolio.
The ten-year CAGR is 16.7%, and the company has maintained a decently-paced upward momentum for the last twenty years. If the stock keeps on growing at the same pace, it will be able to create potent value for its shareholders.
11. Thomson Reuters Stock
Dividend Yield: 1.88%
Market Cap: $51.3 billion
Thomson Reuters is a global leader in problem-solving and data gathering. Its parent companies, Thomson and Reuters, were found in 1934 and 1851, respectively. Thomson acquired Reuters in 2008, and the two companies merged into one.
It’s a media company, but the scope of its operations is significantly wider. With data becoming the most important commodity, Thomson Reuters is in a strong position to capitalize on a digital future.
The company has increased its dividends for 26 consecutive years, and its ten-year CAGR is 14.5%. Though the combination of the yield and the CAGR makes it a relatively weaker pick, its future prospects might be stronger than many others on this list.
12. Manulife Stock
Dividend Yield: 4.84%
Market Cap: $57 billion
Manulife is the largest insurance company by both the market capitalization as well as assets under management ($1.2 trillion). It’s also among the fifteen largest insurance companies in the world. It’s offering a generous yield at the moment, and as an aristocrat, has increased its dividends for the past six years.
Manulife was founded 133 years ago and currently serves over 30 million clients worldwide. It operates primarily in the country, the US (under the name of John Hancock), and in Asia.
As a leader in the insurance industry with strong revenues and a globally recognized brand, Manulife is as blue-chip as it gets.
13. Franco-Nevada Stock
Dividend Yield: 0.76%
Market Cap: $32.4 billion
Franco-Nevada isn’t the top dog of the golden industry. It’s the third-largest gold company, but it’s certainly a leader in the royalty and streaming sector.
This shields us from some of the problems that plague gold companies directly associated with mining. Also, its past growth and growth potential has is significantly better than the two larger stocks, so this is the blue-chip stock I would recommend from the precious metal sector.
The company is only 13 years old and has been a dividend aristocrat for 12 of those years. It has a powerful ten-year CAGR of 19.4%.
14. Toronto Dominion Stock
Dividend Yield: 4.5%
Market Cap: $130.35 billion
Toronto Dominion is one of the ten largest securities currently trading on the TSX and the most generous dividend grower among the big five. It has a massive presence in the US and is the fifth largest North American bank by the number of branches (2,300 in total).
The bank serves 26 million people in the world. TD’s history can be traced back 165 years, making it one of the oldest financial institutions on the continent. With 13 million digital active digital users, it’s also among the top online banks in the country.
15. Enbridge Stock
Dividend Yield: 7.63%
Market Cap: $110.9 billion
Considering its extremely generous yield, a stellar dividend history (24 consecutive years of growth), and the ten-year CAGR of 8.96%, it should have been higher on this list. But it’s at the bottom of this blue-chip stack because of the uncertainty surrounding the energy sector. Enbridge is the leader in the energy sector by a large margin.
The company runs the most extensive oil pipeline network in North America, which shelters it a bit from the headwinds that are rocking this sector. Still, the sector might be radically different after one or two decades. This makes Enbridge relatively (compared to other blue-chip stocks on this list) risky as a long-term investment.
How to Buy Canadian Blue Chip Stocks in Canada
My two favourite ways to buy Canadian blue chip stocks in Canada are the following:
- Questrade – Canada’s leading discount broker, I use Questrade to trade most of my stocks. It has a desktop and mobile trading platform. It will cost between $4.95-$9.99 per stock trade. With this special offer, you can get $50 of commission-free stock trades here.
- Wealthsimple Trade – If you don’t mind buying and selling stocks on your mobile device, there isn’t any better way than to use Wealthsimple Trade. All Canadian stock and ETF trades are commission-free. Get a $10 signup bonus when you sign up here.
We hope you found this list helpful. You can pick the stock(s) that fits you best and resonates with your investment goals and your portfolio’s orientation (dividend-based passive income, growth, or a combination).
With many of the blue-chip stocks on this list, you can add a significant amount of growth to your portfolio without pushing your risk profile.
If you’re looking to get some real estate exposure, check out this article on the best REITs in Canada.