Whether you’re a beginner or an advanced investor, you can still achieve your investment goals by parking your cash in some tried and true Canadian stocks.
And if you are looking for the best Canadian stocks to hold forever, there are some that stand out from the rest. I’ll go over my top picks below.
Best Canadian Stocks You Can Hold Forever
Based on certain characteristics (see below this list), I’ve chosen the top stocks that most Canadian investors can buy and hold forever
- Royal Bank Of Canada (RY.TO)
- Constellation Software (CSU.TO)
- TC Energy (TRP.TO)
- Metro (MRU.TO)
- Fortis (FTS.TO)
1. Royal Bank of Canada
The Royal Bank of Canada is the most valuable security on the TSX and has been for several years. It’s the largest Canadian bank by market cap and in a number of other operational domains.
Like all the other major banks in Canada (the big six), it benefits from conservative banking practices, which allows it to weather the market downturns better but throttles growth compared to American banks.
Still, Royal Bank of Canada has emerged as one of the best growers in the banking sector and offers a compelling combination of dividends and capital appreciation potential.
It’s also an established aristocrat that has been growing its payouts for twelve consecutive years. It would have been longer if it weren’t for the Great Recession.
It operates in 29 countries and generates over 40% of its revenue outside Canada. The operational diversification adds another layer of safety.
Its Tier 1 Capital (CET-1), which is one of the best measures of a bank’s financial safety, has almost always remained quite healthy. The dividends are backed by solid financials and a healthy payout ratio.
The stock is quite resilient as well. It bounced back from the 2008 market crash in under a year and in just ten months after the 2020 crash. It has a stable beta of about 0.79.
Yes. It’s a leader in the Canadian financial sector, and while it may not be “too big to fail,” (though I sincerely believe it is), it’s as close as you can get in the Canadian market. But the best part is that it has not slowed down under its own weight.
Even if you buy it at a peak and experience a slump right after, you are still likely to double your capital in a decade – through both dividends and growth. That assumption is based on the stock’s performance in the last ten years.
2. Constellation Software
It’s basic investment wisdom that “no stock can keep going up forever,” and is backed by the performance of thousands of stocks in both the American and Canadian markets.
One of the handful of outliers that have defied this wisdom is Constellation Software. It joined the market in 2006, and apart from a brief stagnant spell lasting till 2008, the stock started going up, and it hasn’t stopped.
There have been multiple slumps/dips across the way, some spanning over a year, but if you evaluate the performance in terms of decades instead of years, it’s clear the stock has gone up constantly and at a breakneck pace.
It has grown over 1,450% in the last ten years alone (between Oct 2013 and Oct 2023).
It has a healthy ownership structure, with individuals owning about 6.9% of the company and institutional investors like Vanguard and Fidelity owning about 40% of the company.
Its portfolio of companies spans over a hundred countries, serving dozens of vertical markets.
The financial growth has kept pace, with the revenue growing from $1.2 billion to $6.6 billion in ten years. It’s also one of the few tech stocks that offer consistent dividends.
3. TC Energy
TC Energy or Enbridge – It’s difficult to go wrong with either of the two stocks as healthy dividend payers with generous yields and a stellar history of dividend growth. Both are midstream giants that you can hold forever for their dividends.
However, TC Energy has a bit of an edge that makes it a better “forever” holding out of the two.
The company transports about a fourth of the natural gas consumed in North America, and the demand for natural gas is expected to outlast the demand for oil, which is expected to start going down by 2025 or 2026, as per the current projections.
In comparison, natural gas demand decline projections are very mild and concentrated in Europe, which can be counteracted by a demand hike in Asia.
TC Energy is even planning on spinning off its oil/liquid pipeline business and focusing solely on natural gas, so it won’t be weighed down by declining oil demand.
The stock is currently trading at a substantial discount and below its target estimate, which has made its dividend yield even more attractive.
Also, considering its past performance, the stock may offer modest capital appreciation over the long term, counteracting the impact of inflation on the capital you have invested in the company.
Yes. The chances of the company losing its financial footing substantially and slashing/suspending its dividends are quite low, and if you can lock in a high yield, it can be a powerful addition to your income generation potential.
The business model of Metro is built around two things that are always expected to remain relevant forever – food and medicine.
Even though there is uncertainty about the overall brick-and-mortar retail business model in the wake of e-commerce, groceries, and pharmacies may have more leeway compared to other products.
Metro is also evolving with the times, and its online grocery offered about 16,905 items at the time of writing this.
Its national footprint gives it a strong strategic position even from an e-commerce perspective, as a significant portion of the total Canadian population lives within a few-mile radius of a Metro store.
The store is also expanding the digital reach of its pharma business and has partnered with the Royal Bank of Canada to launch a reward program called Moi, which may lead to more customer loyalty and more reliable revenues.
Metro’s operational and financial growth has gone hand in hand in the past ten years (between 2013 and 2022). The number of total food stores rose from 566 to 975, and drug stores more than doubled in numbers (from 257 to 645).
It has also expanded its footprint from Quebec and Ontario to New Brunswick. Sales grew by about 65% and operating income by 136% over that period.
The stock has risen by over 230% between Oct 2013 and Oct 2023, and overall returns are even higher (if you include the dividends). Metro is very well-positioned to continue this growth for decades to come.
Yes. The business model is sound, and the growth has been quite sustainable and consistent over the years. The company also pays and grows dividends, though the yield is not ideal.
Fortis is one of the easiest “forever” picks in Canada. It’s a utility business with ten different utility operations under the Fortis banner and about 3.4 million electricity and natural gas (combined) customers.
99% of the company’s revenues are from regulated utility operations, which makes the overall business model quite safe and predictable and almost immune to competition.
The operations are geographically diversified, covering multiple Canadian provinces and a few US states, as well as two British Overseas territories.
Over the last decade (2013 to 2022), the company has grown its total electricity and natural gas customers by about 50% and 30%, respectively.
The financial growth has outpaced organic growth by a massive margin, with revenues growing by 175% and net earnings by over 250%.
The primary reason investors are attracted to this stock is its dividends. The company has the second-longest dividend growth streak in the country (49 years in 2023).
The dividends are safe, backed by a healthy payout ratio and healthy financials. The stock also offers modest capital appreciation potential, which, together with the dividends, can offer about 100% to 150% returns over a decade with a high degree of reliability.
Fortis is one of the most reliable dividend aristocrats in Canada, and considering its business model and realistic growth, it may remain this reliable dividend payer for decades to come.
It’s an ideal stock for both dividends and modest capital appreciation (reliable over the long term).
Honourable Mentions for the Best Canadian Stocks to Hold Forever
If you are looking for more than the five best Canadian stocks you can hold forever, the following are options worth considering.
- National Bank of Canada
- Intact Financials
- Canadian Pacific Kansas City
- Alimentation Couche-Tard
Characteristics Of The Best Canadian Stocks To Hold Forever
The core characteristics of the best Canadian stocks you can hold forever are broader than just the valuation. Some characteristics of the forever Canadian stocks are:
The return potential is simply their capital appreciation potential for pure growth stocks. For dividend stocks, the overall return potential includes both components.
A dividend stock might only grow 3% a year. Still, if it’s also returning you 4% of your invested capital in the form of dividends every year, it’s comparable and, in some ways, even better than growth stocks offering a 6% a year growth rate.
You can use the dividends as a passive income source or use DRIP to grow your stake in the company.
When you consider the overall return potential of an aristocrat, you should also take the dividend growth rate into account. Comparing it to inflation can give you a more realistic view of the overall long-term return potential.
Determining how “safe” a stock is can be challenging. Metrics like beta only give you an understanding of a stock’s correlation or dissociation with the broad market at a given time.
A leadership position in the market is a strong marker of relative safety and a strong indication of competitive advantages, but even it falls short in some circumstances. Look for companies with an economic moat so they are less vulnerable to competitors.
Many successful blue-chip businesses reach a point of saturation at which, if they don’t radically change course and evolve the right way, they start dying. Nokia and Blueberry can be considered examples that loosely followed this phenomenon.
So it’s imperative that, when you are looking at an investment that you can virtually hold forever, you also look at its organic growth potential and whether it’s adapting to the changing market conditions of the business without straying too far from its core competency.
“Past performance is no guarantee of future performance.” This is the most common disclaimer you are likely to see with investment instruments like funds and even individual stocks, and it’s true.
But historical performance is also the best source of information you need to determine whether it’s a business you can count on for decades.
You can see how the stock behaved in different types of crises, like recession and pandemic, and sector-specific problems, like the 2014-2015 energy sector crash.
A dividend stock’s payout history and whether they sustained their dividends when the ratio crossed over the safe threshold.
Even dips and subsequent recoveries offer crucial insights regarding a stock’s tenacity and resilience.
When it comes to buying the best Canadian stocks to hold forever, many investors have the same questions:
What Is The Best Stock To Hold Forever?
Royal Bank of Canada, Canadian National Railway, Constellation Software, Fortis, and Franco Nevada – Any one of these five stocks can be the best choice as a forever stock holding.
Which Is The Best Stock To Invest In For the Long-Term?
The best stock to invest in long-term is resilient in adverse market conditions and offers a healthy return potential.
What Are The Safest Canadian Stocks To Buy?
Industry leaders like the Royal Bank of Canada, BCE or Telus, Alimentation Couche-Tard, Brookfield Asset Management, and Franco-Nevada are some of the safest Canadian stocks you can buy.
How To Buy the Best Canadian Stocks To Hold Forever
The cheapest way to buy stocks is from discount brokers. My top choices in Canada are:
- 105 commission-free ETFs to buy and sell
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- Desktop and mobile trading
- Reputable fintech company
- Fractional shares available
To learn more, check out my full breakdown of the best trading platforms in Canada here.
The best Canadian stocks to buy and hold forever can find a place in the portfolios of most Canadian investors, from extremely conservative ones to highly daring ones.
They are a diversified group of assets you can park all or most of the savings you are planning on growing for your retirement.
For another excellent list, check out the best dividend stocks in Canada.