Want to invest in companies that have been around for a long time and have a reputation for stable quality and results?
Blue-chip companies have gotten their label from blue chips within a poker set, which usually represents the highest dollar amount out of all the chips.
Blue-chip companies have done a great job of posting great operating results over time and are generally stable during tough economic times.
We will cover the best Canadian blue-chip stocks to consider for your portfolio below.
Pros and Cons of Blue-Chip Stocks
Blue-chip stocks, like all other investments, come with their advantages and disadvantages.
One of the most important things to understand when investing is the trade-off between risk and returns. As an investment becomes riskier, it tends to offer a higher potential return and vice versa.
Make sure that the properties of blue-chip stocks are well aligned with your investment goals and objectives before deciding to add them to your portfolio.
- More stability during uncertain market conditions
- A high dividend yield
- A larger market cap
- Less explosive stock price growth potential
- Slower future growth because of higher dividend payout ratios
- Perceived safety may deceive investors (Lehman Brothers and General Motors bankruptcies etc.)
How to Pick Blue-Chip Stocks
It’s important to look at a few features of blue-chip stocks before adding them to your portfolio.
For a stock to be considered blue-chip, it must typically be at least mid-cap or large-cap (typically a market cap of over $2 billion).
The company must also have a long track record of good results and overall stability.
Once a stock fits the blue-chip criteria, here are some features to look for that could make it a good candidate for an investor’s portfolio:
- A solid and growing dividend yield over time
- A business with a moat around operations (making it difficult for peers to compete or exist)
- A long performance track record with a history of being relatively stable during periods of market stress
Best Canadian Blue-Chip Stocks
At a quick glance, here are our top picks for Canadian blue-chip stocks, which I will go over in more detail below.
|Name of Bank||Ticker||Market Cap||Forward P/E Ratio||12-Month Trailing Dividend Yield|
|Enbridge Inc.||ENB.TO||$98.99 Billion||16.93||7.58%|
|Royal Bank of Canada||RY.TO||$165.98 Billion||10.3||4.44%|
|Canadian National Railway Company||CNR.TO||$101.84 Billion||19.85||1.97%|
|Toronto-Dominion Bank||TD.TO||$151.63 Billion||10.15||4.53%|
|Canadian Pacific Railway Limited||CP.TO||$91.14 Billion||21.69||0.78%|
|Bank of Nova Scotia (Scotiabank)||BNS.TO||$72.48 Billion||8.66||6.9%|
|Nutrien Limited||NTR.TO||$37.72 Billion||11.12||2.72%|
|Bank of Montreal||BMO.TO||$79.07 Billion||8.96||5.19%|
|Fortis Inc.||FTS.TO||$27.22 Billion||17.47||4.02%|
|Metro Inc.||MRU.TO||$15.95 Billion||14.65||1.73%|
|Barrick Gold Corporation||ABX.TO||$38.71 Billion||15.31||1.82%|
- Royal Bank of Canada (RY.TO)
- Canadian National Railway (CNR.TO)
- Thomson Reuters (TRI.TO)
- Alimentation Couche-Tard (ATD.TO)
- Constellation Software (CSU.TO)
- Waste Connections (WCN.TO)
- Telus (T.TO)
- Franco-Nevada (FNV.TO)
- Intact Financial (IFC.TO)
- Fortis (FTS.TO)
- WSP Global (WSP.TO)
1. Royal Bank of Canada
The Royal Bank of Canada is arguably Canada’s “bluest” blue-chip stock. It’s the largest company in the country by market capitalization and one of the largest banks in North America.
It has been operating in Canada since 1864 and internationally since 1882. It has reigned as the largest bank in Canada since the 90s and has yet to be dethroned, though Toronto Dominion has surpassed it in a few categories.
Despite its considerable international presence, roughly 60% of its revenue still comes from Canada.
It has 17 million clients and a presence in 29 countries around the globe. It’s financially stable, like most other Canadian banks, thanks to the conservative practices imposed by their regulator.
The bank has been paying dividends for over 150 consecutive years and growing its payouts for at least ten consecutive years.
It has also maintained a payout ratio of around 46% in the last ten years, with the number going above 50% just once (2020).
This is beyond simply conservative. It also boasts a strong capital ratio (CET1), which indicates its strength/stability as a banking institution.
If stability and modest income potential are all you are looking for in a blue-chip stock, the bank is well-positioned to over-deliver.
It offered the second-best returns to its investors (collectively) between Sep 2013 and Sep 2023 in the banking sector – about 180%.
This bank’s only major risk factor is its exposure to the Canadian housing market, the second largest in the country’s banking sector.
Alternative To Consider: Toronto Dominion
2. Canadian National Railway
Like most old railway companies, the Canadian National Railway has a special place in the country’s history.
Millions of people and thousands, if not hundreds of thousands, businesses rely upon its services. It used to be a crown corporation from its inception in 1919 to 1995, when it was finally privatized.
It has one of the largest railroad networks in North America (20,000 miles). It connects three major North American coasts, which makes it a crucial economic driver in the region and one of the most important cogs in the regional supply chain.
Its international intermodal, responsible for transporting shipping containers, is one of its largest business segments and connects Canada to Mexico.
The company is old, well-established, operationally stable, and relevant. Its financials are just as impressive.
It has grown revenues by about 80% between 2013 and 2022 and operating income by about 79%. The debt is massive but manageable, considering its revenues.
Canadian National Railway is also a well-established dividend aristocrat that has grown its payouts by 27 consecutive years, making it an aristocrat in the US.
The dividend yield typically remains under 2% but is nicely balanced with the company’s capital appreciation potential. It grew its investors’ capital by over 200% between Sep 2013 and Sep 2023.
There is relatively little downside to a blue-chip giant like the Canadian National Railway. In fact, it’s a powerful pick, even for a blue chip, considering the capital appreciation potential it offers, which may seem disproportionate to its size.
Alternative To Consider: Canadian Pacific Kansas City
3. Thomson Reuters
While the business model of Thomson Reuters relies quite heavily on content, calling it a content company will be a misrepresentation.
It provides information and insights that are written, edited, and vetted by professionals in the industry. It primarily caters to three market segments – Legal, taxation, and corporate.
The other two business segments, which are the actual roots of the company, i.e., News and Global Print, are lagging behind its legal, taxation, and corporate services in revenue generation.
The company has already integrated AI and ML into its business mix, which indicates that it’s evolving with the industry.
The company owns a variety of well-known brands/platforms that professionals from each of its target market segments use.
Its most significant blue-chip characteristics are its reputation and the trust it commands in its target markets.
Most of its revenue is recurring (80%), and the company has experienced steady organic growth across multiple business segments. The return potential is also quite significant, with collective returns reaching 500% in the ten years between Sep 2013 and Sep 2023.
You should understand that despite its deep market roots and financial strengths, it’s vulnerable to the very thing it’s actively integrating into its business model – Artificial Intelligence.
Legal professionals make up the largest revenue base for the company. If AI-powered low-cost/no-cost alternatives to TRI’s resources start emerging, they may significantly impact its top line.
Alternative To Consider: None
4. Alimentation Couche-Tard
Alimentation Couche-Tard is one of the largest convenience retailers on the globe. They have a presence in about 24 countries and about 14,400 stores.
It operates through three brands and owes the bulk of its global presence to the Circle K brand. The company, or technically one of the companies that made up ATD, started in 1980.
However, the most significant growth catalyst was added to the company in 2003, with the acquisition of the US-based Circle K. Now, it stands just behind 7-Eleven in terms of market presence and the number of convenience stores in its portfolio.
It’s also a financially stable company. Between 2013 and the first quarter of 2023, the company experienced a revenue growth of about 100% and EBITDA growth of over four times.
The company pays dividends as well, but the yield is typically too low, mostly under 1%. But the capital appreciation potential is compelling enough to more than makeup for it. The stock grew by over 600% between Sep 2013 and Sep 2023, which is quite significant for a blue-chip giant.
The only major risk dimension you may need to consider when buying this stock is its level of international exposure.
A myriad of factors, including a local competitor moving in, political instability, economic downturns (region-specific), etc., may lead to financial losses and reputation damage, which may permeate the stock.
Alternative To Consider: Metro
5. Constellation Software
Constellation Software is an acquisition-oriented company that aims to acquire and manage top software companies that develop industry-specific solutions.
It has a portfolio of six companies that, in turn, have their own portfolios of acquisitions. This includes Volaris with 170 companies and Jonas with over 140 companies. This makes Constellation’s overreaching portfolio quite extensive.
Constellation Software is easily the best tech stock you can invest in Canada for growth.
It has grown so consistently (and so explosively) that from its inception in 2006 to Sep 2023, the stock price jumped from $20 to over $2,800. That’s a growth of over 15,000%, which is unparalleled in scale and consistency.
The growth has slowed down over the years, but even Constellation’s slow is faster than many. This is reflected in its five-year growth of 195% between Sep 2018 and Sep 2023. This consistency, which is one of the primary growth drivers, is reflected in the financials of the company as well.
Between 2013 and 2022, the company grew its revenues by over 440% and net income by over 490%. Its debt is roughly half of its yearly revenue (2022), and it has a significant cash pile.
Insiders own about 6.9% of the company, which indicates strong trust from within the company.
Constellation is an outlier as a tech stock where growth of this scale rarely comes with such a consistent track record.
It’s one of the most trusted tech stocks in Canada, and unless there are major shifts in its acquisition criteria or management style, you may buy it without reservation.
Alternative To Consider: None
6. Waste Connections
Waste Connections is the third largest publicly traded solid waste company in North America.
It operates in 43 US states and six Canadian provinces, with a total of about eight million customers, including both residential and commercial customers.
Thanks to the essential services the company provides, Waste Connections is akin to a utility business, which makes it financially stable.
It’s also a good ESG investment and can become an even better one by focusing on electrifying its fleet. The company can also seek operational growth by entering markets like battery recycling, which is expected to become a massive market.
The company has been around for over 25 years and is rooted in thousands of individual communities across North America.
The company is mostly owned by institutions (86%), with 10.4% owned by Vanguard alone. This lends the stock a lot of stability.
The company has experienced solid organic and financial growth in the last ten years (between 2013 and 2022, with its solid waste collection operations growing by 142% and recycling operations growing by over 100%.
The revenue and net income over that period grew by about 275% and 320%, respectively.
It’s also a dividend aristocrat, but the dividends pale in comparison to its capital appreciation potential, which is decent for its magnitude.
You should consider Waste Connections for its stable growth and overall business stability. The only risk you may be carrying with this stock would be its modest overvaluation.
Alternative To Consider: None
As one of the three telecom giants in Canada, and while all three are pure-breed blue chips, Telus stands out from the crowd for a number of reasons.
The company dominates the Western Canadian telecom market and has an enormous consumer base – 9.6 million mobile phone consumers and 2.4 million internet subscribers.
That represents a modest 23% growth in mobile customers and 71% growth in internet customers from 2013.
However, don’t judge Telus too harshly on the slow mobile phone growth because it has been a diluted market for years now. And Telus seems well-positioned to grow in the next big domain for the telecom industry – the Internet of Things (IoT).
Financial growth over the same period (2013 to 2022) is a bit more compelling – revenue and EBITDA both grew by over 60%. The financials of the company are healthy, and it has a strong regional presence.
More importantly, it’s dominating two markets – digital health and home security, where it virtually has no competition from the other two telecom giants.
You may consider its overvaluation and heavy debt a major risk factor, but they are common across the telecom sector.
In fact, Rogers carries more debt than its current market capitalization. Telus offers the best combination of capital appreciation potential and dividends among the three, especially if you lean toward growth.
The only major risk the company carries is one of the other three dominating the Canadian IoT market before Telus, making its entry/penetration difficult and costly.
But considering its forward-thinking business approach, this is highly unlikely.
Alternative To Consider: BCE
Franco Nevada is one of the largest gold royalties and streaming companies, not just in Canada but around the globe.
It started out as a gold mining company and was acquired by Newmont and later spun off as a pure-play royalty and streaming company in 2007.
It doesn’t directly own any mining operation, but the portfolio of the gold projects it has a stake in covers the entire globe.
The company has over 419 projects in its portfolio, and over 60% of them are in the exploration stage.
From an asset perspective, only about 55% of the company’s revenues are generated from its gold assets (2022). About 25% come from its royalties in energy-related assets. This diversification is unique to Franco-Nevada in the gold sector.
Even though it’s not as old as many other companies on this list, that doesn’t diminish its reputation or credibility.
Over the last sixteen years, it has emerged as one of the largest gold royalties companies around the globe and has a stake in projects of some of the most senior gold producers in the world.
It’s financially quite stable and has experienced a decent jump in revenue between 2016 and 2022 (about 1.9 times).
It has also grown its dividends for sixteen consecutive years, but the dividends are rarely what attract investors to this company, especially considering its 300% growth between Sep 2013 and Sep 2023.
You should understand that even though Franco Nevada has been a far more stable grower compared to typical gold stocks, it’s not immune to gold price fluctuations and demand cycles.
But it’s far less vulnerable to bull markets when gold and, consequently, gold stocks lose their lustre as a “hedge” against the market.
Alternative To Consider: None
9. Intact Financial
Intact Financial is the Canadian Property and Casualty (P&C) insurance giant that can trace its roots back over 200 years, though it emerged as a major player in the insurance industry in the last century through multiple acquisitions.
Now, the company dominates roughly 20% of the P&C insurance market in Canada (the largest slice).
It also has a strong presence in the UK and Ireland through its RSA Group. It has a decent presence in the US as well, but Canada remains its largest market segment.
It has experienced significant operational and financial growth between 2013 and 2022, with net income growing by about six times over the period.
The company has a strong regional presence, and the gap between it and the next largest P&C insurance company is too wide to be threatening right now.
Its financials are rock solid, and with 53% institution ownership, the stock also seems quite stable. It has also been growing its payouts by 18 consecutive years, by about 11% every year (on average).
You might be more impressed by its capital appreciation potential, but the dividends, even with the modest yield, are a significant segment of its long-term return potential.
There is very little downside to this stock, and the only “unimpressive” part of this stock is its valuation, which is higher compared to other insurance giants in the country.
Alternative To Consider: Sun Life Financials
Fortis fits the textbook definition of blue-chip stocks even more than most stocks on this list, which is saying something.
It’s one of the safest, most trusted stocks on this list, with rock-solid financials and a healthy business model that is highly resilient against weak markets, economic conditions, and adverse agents like rising interest rates/costly financing.
It’s important to understand that resilience is not the same as immunity. Fortis still falls when the market does, but it bounces back quite quickly.
Even in adverse economic conditions like recession, its financials don’t suffer much because, as a utility business, it generates its revenues from the utility bills that 3.4 million customers pay, something most individuals/households prioritize over most other expenses.
The bulk of Fortis’s financing is fixed rate (about 95%), which protects it from interest rate hikes and makes debt management relatively easier.
It is one of the safest and most consistent dividend stocks in Canada and has grown its payouts for 49 consecutive years.
One more year and it will be counted among the dividend kings, a title less than a hundred companies can claim today in the Americas and Europe combined.
The capital appreciation potential is modest but far from non-existent, which pushes the overall return potential even higher.
Fortis is even safe from the flux happening in the power generation industry. As it focuses most on transmission and end-connections, the company may remain afloat regardless of the power source.
The only realistic risk you should be aware of would be a major breakthrough in power generation, like Fusion, which should give you an idea of exactly how safe this stock is.
Alternative To Consider: Canadian Utilities
11. WSP Global
WSP Global is the largest engineering company in Canada and among the 15 largest engineering firms (by market capitalization) around the globe.
It has over 67,000 employees across the globe, which includes professionals from a wide range of disciplines.
Canada only makes up about 18% of the corporate mix, which is an endorsement of the “global” in the company’s name.
It caters to both public and private sector clients, and even though transport and infrastructure solutions make up the bulk of the business mix, the earth and environment segment is rapidly growing.
From its inception, acquisitions have been an important part of the company’s growth and allow the company to consolidate a wide range of expertise and professionals under the WSP banner.
The financials of the company have been growing at a decent pace for the last several years.
Between 2016 and 2022, the revenues experienced an annualized growth of about 12.4% and Adjusted EBITDA by about 29.5% per year (on average). The stock has grown by over 300% over that period.
As a globally present engineering giant with an extensive portfolio of successful projects, WSP Global seems like a relatively safe bet, even for a blue-chip stock.
However, you should keep its overvaluation and major overhead costs (staffing) in mind when choosing this stock.
Alternative To Consider: None
Should you Invest in Blue-Chip Stocks?
The decision to invest in blue-chip stocks versus other investments depends on your characteristics as an investor.
Before investing in any equities, your risk tolerance should be at least a “medium.” Within the universe of stocks, the safest would be considered medium risk, while more aggressive stocks could be closer to high risk.
Blue-chip stocks tend to be considered safer than other stocks, so their risk is likely closer to a medium risk rating. These stocks are a great potential choice for investors that:
- Prefer lower volatility within their stock portfolio
- Are looking for a stable income stream through stock dividends
- Want to invest in businesses that are generally essential or important to an economy
There are a lot of excellent options when it comes to finding Canadian blue-chip stocks.
Although the Canadian economy is concentrated across only a few sectors, there are many excellent stock choices to choose from to grow your money over time.
Dividend aristocrats are a very similar type of stock to blue-chip companies. Make sure you consider some of the best dividend aristocrat stocks in Canada as well.