Canadian households spend roughly 10.4% of their annual expenditure on food, including both home-cooked and restaurant food.
Food businesses are evergreen because no matter the economic condition, people still need to eat, which translates to reliable revenues.
And even though food stocks are not completely immune to poor market conditions, the best food stocks in Canada may offer more resilience thanks to the timeless relevance of the underlying business.
Best Food Stocks In Canada
For the following list, we haven’t included:
- Tobacco and alcohol stocks
- Pure restaurant chains like RBI and MTY Foods
Stocks are arranged in the order of market capitalization at the time of writing this.
Unless otherwise specified, all the stocks trade on the TSX.
- Loblaw Companies (L.TO)
- George Weston (WN.TO)
- Metro (MRU.TO)
- Empire Company (EMP-A.TO)
- Saputo (SAP.TO)
- Premium Brands Holdings (PBH.TO)
- Maple Leaf Foods (MFI.TO)
- North West Company (NWC.TO)
1. Loblaw Companies Stock
- Ticker: L.TO
- Industry Niche: Food and pharmacy retail
- Forward Dividend Yield: 1.39%
- Dividend Payout Ratio: 25.34%
- Dividend Yield (12-Month Trailing): 1.4%
- Upcoming Dividend Date: Dec 30, 2023
- Market Cap: $38.49 Billion
- Forward P/E Ratio: 14.59
With over a hundred years of operations, Loblaw has emerged as the clear industry leader when it comes to food and pharmacy retailing in Canada.
It has a network of over 2,400 stores across Canada, and 90% of the Canadians live within 10 kilometres of a Loblaw store.
The company is also responsible for 850 private label food products, and a decent percentage of its total revenue already comes from its e-commerce business, which shows that the company is making great strides in the digital space.
It’s a dividend aristocrat with a stellar payout growth history but a relatively small yield.
2. George Weston Stock
- Ticker: WN.TO
- Industry Niche: Holding company
- Forward Dividend Yield: 1.73%
- Dividend Payout Ratio: 22.08%
- Dividend Yield (12-Month Trailing): 1.67%
- Upcoming Dividend Date: Jan 01, 2024
- Market Cap: $22.22 Billion
- Forward P/E Ratio: 13.15
George Weston is basically a holding company that owns two separate publicly traded companies: Loblaw and Choice Properties. Its ownership of Loblaw, the retail food leader in the country, allows it to be a part of this list.
Two diversified business segments, even though the revenues skew mostly towards Loblaw, give George Weston a slight edge over the underlying businesses individually.
Its capital appreciation potential is less potent compared to Loblaw, and the yield is much lower than its REIT. Still, it’s a stable food stock worth considering.
3. Metro Stock
- Ticker: MRU.TO
- Industry Niche: Food and pharmacy retail
- Forward Dividend Yield: 1.55%
- Dividend Payout Ratio: 22.21%
- Dividend Yield (12-Month Trailing): 1.73%
- Upcoming Dividend Date: Nov 14, 2023
- Market Cap: $15.95 Billion
- Forward P/E Ratio: 14.65
With 950 food stores and 650 pharmacies, Metro is another food giant in the country. It operates through seven different brands, each with its own regional presence and client base.
Most of its grocery stores and other food-related retail locations are in Quebec and Ontario.
The company has been around since 1947, and most of the underlying chains that it has acquired over the years have their own roots and histories, which translate to a loyal consumer base and steady financials.
The company grew its market value by roughly 300% in the last decade. It’s also a dividend aristocrat with a modestly low yield, but it’s the consistency and reliability of its capital appreciation potential that attracts most investors.
4. Empire Company Stock
- Ticker: EMP-A.TO
- Industry Niche: Food retail conglomerate
- Forward Dividend Yield: 1.70%
- Dividend Payout Ratio: 21.43%
- Dividend Yield (12-Month Trailing): 1.81%
- Upcoming Dividend Date: Oct 31, 2023
- Market Cap: $9.35 Billion
- Forward P/E Ratio: 11.17
The Nova Scotia-based Empire Company is the proud owner of Sobeys, the second-largest grocery chain in Canada, with over 1,500 stores across the country.
Sobeys has a long and proud history, and it has been in the food business since 1907. Empire bought the company in 1987, and since then, it has been the core of the conglomerate.
But Empire is in the process of diversifying its business model. It has taken a 51% stake in Longo’s grocery gateway, an e-commerce grocery business serving GTA.
It’s also expanding its e-commerce presence and will soon have stores in almost all provinces that offer curbside pickup and e-commerce delivery services. The yield is usually low, but the dividends have been reliable.
5. Saputo Stock
- Ticker: SAP.TO
- Industry Niche: Dairy giant
- Forward Dividend Yield: 2.28%
- Dividend Payout Ratio: 108.33%
- Dividend Yield (12-Month Trailing): 2.74%
- Upcoming Dividend Date: Dec 15, 2023
- Market Cap: $11.29 Billion
- Forward P/E Ratio: 12.76
Milk is one of the most important food groups, and Saputo is the Canadian giant when it comes to milk and dairy products.
It’s the ninth-largest dairy company in the world and the second-largest in North America. It cates to four specific market segments (Regional): US, Canada, Europe, and international.
North America makes up the bulk of its revenues. The company processes about 11 billion litres of milk every year and converts it into a variety of products for its different markets (60 countries).
Saputo stock has been on a steady decline since 2017, but this pattern is unlikely to continue for long.
As soon as it becomes undervalued and starts turning the tide, it may become a decent holding for its capital appreciation potential. It’s already a decent dividend stock with a modestly high yield.
6. Premium Brands Holdings
- Ticker: PBH.TO
- Industry Niche: Specialty foods and distribution
- Forward Dividend Yield: 2.72%
- Dividend Payout Ratio: 84.30%
- Dividend Yield (12-Month Trailing): 3.28%
- Upcoming Dividend Date: Jan 15, 2024
- Market Cap: $4.09 Billion
- Forward P/E Ratio: 16.77
Premium Brands is the specialty food leader in the country. It caters to about 22,000 B2B customers across the country, and the largest portion of its revenue comes from its protein-based products.
It has accumulated numerous brands under its banner in both its business segments (Sociality food and distribution), and they cover everything from sandwiches and premium meats to seafood.
The PBH stock is a bit different from the B2C businesses on this list since its revenues are tied to a variety of other food businesses, including restaurants which fall under discretionary spending and might not do well under certain market conditions.
Still, it offers decent cyclical growth (if you buy the dip) and a modestly high yield.
7. Maple Leaf Foods
- Ticker: MFI.TO
- Industry Niche: Packaged meats
- Forward Dividend Yield: 2.94%
- Dividend Payout Ratio: 134.55%
- Dividend Yield (12-Month Trailing): 3.32%
- Upcoming Dividend Date: Dec 29, 2023
- Market Cap: $3.08 Billion
- Forward P/E Ratio: 15.51
The Mississauga-based Maple Leaf has always been about meat-based protein. It caters to 20 global markets, primarily Canada and the US, and has six major and several minor brands under its name, including the Maple Leaf brand, which focuses on packaged meat products.
It’s also into premium meats, organic/natural (untreated with antibiotics) meat, and halal foods.
Many Maple Leaf brands have a strong regional presence and roots, which results in a loyal consumer base.
However, the company’s overreliance on meat-based protein at a time when more people are looking at alternatives is probably why it has been underperforming the market in the last five years.
But its dividends are solid, and its long-term growth potential might be decent enough.
8. North West Company
- Ticker: NWC.TO
- Industry Niche: Grocery stores
- Forward Dividend Yield: 4.29%
- Dividend Payout Ratio: 50.17%
- Dividend Yield (12-Month Trailing): 4.17%
- Upcoming Dividend Date: Oct 13, 2023
- Market Cap: $1.73 Billion
- Forward P/E Ratio: 12.82
North West is all about serving the underserved. It primarily targets rural communities in Canada, the US, and even the Caribbean.
And while this may result in higher overhead costs, it also gives the company a distinct competitive advantage in markets that few, if any, major brands and grocery chains cater to.
It has six primary brands under its name (and several smaller ones) and a network of 230 stores (184 in Canada, the rest international).
The stock has seen incredible growth since its inception, and though it has slowed down a bit in recent years, the long-term growth potential is still powerful. It also offers a much healthier yield compared to other food stocks on this list.
There are four Canadian and three US-based Food stocks that you should also look into:
SunOpta Stock: It’s a Brampton-based company and a mid-cap stock. It focuses on a variety of plant-based products like milk/beverages, snacks, and frozen fruits.
It has shown cyclical growth in the last ten years, and three growth phases appreciated the value by roughly 140%, 160%, and 1,000%, respectively. It doesn’t pay dividends.
Rogers Sugar Stock: Rogers Sugar is the largest refined sugar company in Canada and the largest maple syrup company in the world, though it doesn’t translate well to its capital appreciation potential.
It’s primarily a dividend stock with a healthy yield. It’s a relatively resilient stock and offers decent capital preservation stock.
High Liner Foods Stock: High Liner Foods processes and markets frozen seafood. It has been around since 1899, is based in Nova Scotia, and has two business segments (food service and retail).
The stock is capable of offering decent cyclical growth, but only if you buy the dip or as close to its as possible. It also offers dividends at a generous yield.
Goodfood Market Stock: It’s an online grocery store that offers meal kits and has accumulated a decent subscriber base. The stock saw modest growth before the pandemic and explosive growth after it.
And if you can buy it right after a correction phase, it can be held for the long-term for its capital appreciation potential.
The four US food stocks to consider (all trade on NYSE):
Kroger Stock: It’s the 7th largest food retailer in the world and has over 2,750 grocery retail locations, 35 food production facilities, and over 2,250 pharmacies.
It’s an incredibly stable business, and the stock offers decent growth potential with a low dividend yield.
General Mills Stock: General Mills is a 150-year-old company with over 100 brands to its name, many of which are the top-selling ones in their respective food groups. It’s a steady growth stock that comes with a relatively high yield.
Kellogg’s Stock: Kellogg’s is a food manufacturing giant that makes several things, from corn flakes to world-famous Pringles and pop-tarts.
The growth potential of the stock has lost its credibility since the 2016 spike, but it offers a very healthy yield.
Food Stocks In Canada
Investing in evergreen businesses is a pre-requisite to success for a long-term investor that follows the buy-and-forget approach for the bulk of their portfolio.
And since food is considered an evergreen business segment, it’s an easy pick. However, you need to understand the food sector as a whole and its relative strengths and weaknesses.
The sector which we can classify as food is highly diverse. Even though it’s dominated by grocery store chains and restaurant chains (to some extent), it also includes food processing companies, distributors, specialized food manufacturers, etc.
As for strengths, in a country like Canada, where the bulk of the population gets their groceries from major grocery stores, farmer’s markets (a fragmented part of the food industry) don’t pose a serious threat.
Also, consumer staple food stocks offer significant resilience and financial stability.
Ironically, a major con of the food industry is also its stability, especially if you are more interested in capital appreciation than reliable dividends.
Many food stocks don’t see a lot of routine capital appreciation and are better buys for capital preservation and dividends. However, there are exceptions, and they can be found among the best food stocks in Canada.
Impact of Online Sales and Delivery Services
Canadians are increasingly turning to online grocery shopping, given its convenience and the added safety it offers, especially in times of global pandemics.
Companies like Loblaw and Empire Company have acknowledged this shift and have invested heavily in expanding their online presence and delivery capabilities.
These platforms not only provide consumers with the flexibility to shop from the comfort of their homes but also offer a wider product range, exclusive online deals, and personalized shopping suggestions based on purchase history.
However, the growth of online sales doesn’t necessarily spell the end for brick-and-mortar stores. Instead, it signifies a shift towards an integrated shopping experience where physical stores work in tandem with their digital counterparts, often serving as pick-up points or hubs for last-mile delivery.
Financial Analysis of Food Stocks
When it comes to investment, food stocks, given their nature, provide a unique proposition. They tend to offer a blend of stability and growth. Financially speaking, these stocks are backed by tangible assets – the products, physical stores, distribution centers, and more.
This tangibility often translates to consistent revenues, as evidenced by the steady performance of many of the top food companies in Canada.
However, it’s important to delve deeper into the financial metrics to truly understand their potential. Factors like dividend yield, payout ratio, and forward P/E ratio provide crucial insights into the stock’s current valuation and future growth prospects.
For instance, a company like Loblaw, with its significant market capitalization and reasonable forward P/E ratio, might be seen as a stable investment, balancing both dividends and capital appreciation.
On the other hand, stocks like Goodfood Market, which have witnessed explosive growth post-pandemic, may represent a higher-risk, higher-reward scenario.
Which Canadian food companies offer the best dividends?
Historically, companies like Loblaw Companies Limited and Metro Inc. have provided consistent dividends. They have a track record of not only paying dividends but also gradually increasing them over the years. Such consistent payouts make these companies stand out as options for income-seeking investors in the food sector.
What are some promising organic food stocks in Canada?
Companies such as SunOpta and GreenSpace Brands have emerged as notable players in the organic food segment. SunOpta, in particular, specializes in sourcing, processing, and packaging organic food products, while GreenSpace Brands offers a range of organic and natural food products.
What are the biggest food companies in Canada by market capitalization?
Some of the biggest food companies in Canada by market capitalization include Loblaw Companies Limited, Metro Inc., and Empire Company Limited. Loblaw, in particular, holds a dominant position in the Canadian food retail landscape with a vast network of stores under various banners.
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Among the best food stocks in Canada, grocery stores stand out for their evergreen nature, decent growth potential, and reliable dividends.
But almost all the stocks on this list have their merits and are likely to be a good fit for certain investors.
And if you want an even wider pool of food-related stocks to choose from, consider these restaurant stocks as well.