Are you looking for long-term stock ideas in Canada but have an overwhelming number of companies to study?
The inflation rate in Canada remained unchanged month-over-month for October, coming in at 6.9%, despite the broad expectations of economists.
Although increasing interest rates have helped to boost future yields on fixed-income instruments, stocks have historically offered higher returns than most other asset classes.
I will outline some of the best long-term stocks in Canada to consider adding to your portfolio and go over some of their key characteristics.
Why Invest in Stocks for the Long Term?
If you are planning to invest for a long period of time, stocks are an excellent asset class to consider investing in. The broad Canadian stock market, represented by the S&P/TSX Composite Index, has offered investors a 9.3% return between 1960 and 2020.
Achieving these levels of returns is difficult through safer asset classes such as fixed income. Safer asset classes tend to come with lower short-term volatility as well as lower long-term returns.
Especially if you are looking to outperform the high current levels of inflation, stocks are an excellent long-term option.
5 Best Long-Term Stocks in Canada
1. Enbridge Inc.
- Ticker: ENB.TO
- Size: Large Cap
- Valuation: Core
- Forward Dividend Yield: 6.37%
- Dividend Payout Ratio: 126.48%
- Dividend Yield (12-Month Trailing): 7.58%
- Upcoming Dividend Date: Dec 01, 2023
- Market Cap: $98.99 Billion
- Forward P/E Ratio: 16.93
Enbridge is a very well-known Canadian pipeline company. The company transports crude oil and other liquids through one of the longest and most complex pipeline systems in the world.
Within the energy sector, Enbridge is classified as a midstream company, involved solely in the transportation of fuels to customers and businesses. The company is headquartered in Calgary, Alberta.
The company has a very long track record of both growing its dividend as well as achieving guidance. Enbridge has performed strongly when compared both to the S&P 500 as well as its midstream peers over the long term.
Enbridge ranks among the largest Canadian companies by market capitalization. Its stock is currently paying an amazing forward dividend yield, making the company an attractive investment for income-focused investors
Enbridge is dual-listed both on the New York Stock Exchange and the Toronto Stock Exchange under the ticker ENB. The stock is categorized as a dividend aristocrat here in Canada, having increased its dividend on a yearly basis over the past 27 years.
The company’s shares have experienced some volatility in the past but the historically high dividend yield helps investors to capture some sort of yearly return despite the underlying share performance.
As a fantastic-yielding, blue chip stock here in Canada, Enbridge stock is a great long-term option to consider for your portfolio.
2. TELUS Corporation
- Ticker: T.TO
- Size: Large Cap
- Valuation: Core
- Forward Dividend Yield: 4.81%
- Dividend Payout Ratio: 91.23%
- Dividend Yield (12-Month Trailing): 5.94%
- Upcoming Dividend Date: Jan 02, 2024
- Market Cap: $35.01 Billion
- Forward P/E Ratio: 21.87
Telus is a key Canadian communications provider across the country, along with other key players such as Rogers Communications and BCE Inc. (Bell Canada). The company is headquartered in Vancouver, British Columbia.
With Telus currently having more than 17 million clients using one or more of the company’s services, the Canadian telecommunications industry is predicted to grow well in the future, especially with the adoption of 5G technologies.
The operations at Telus report results across two different segments: Telus International and Telus Technology Solutions.
The company has an excellent track record of increasing its dividend to investors annually. Telus has raised its dividend each year for the past 18 consecutive years. It currently offers investors a very attractive forward dividend yield.
Telus stock has had great defensive characteristics when looking at historical performance. The company has managed to avoid large drops in its share price despite navigating through difficult market conditions several times over the past years.
The stock’s resilient performance, coupled with the good potential for future growth in the Canadian communications space makes Telus a great long-term stock to consider holding.
3. Canadian Imperial Bank of Commerce
- Ticker: CM.TO
- Size: Large Cap
- Valuation: Value
- Forward Dividend Yield: 5.22%
- Dividend Payout Ratio: 45.58%
- Dividend Yield (12-Month Trailing): 6.34%
- Upcoming Dividend Date: Oct 27, 2023
- Market Cap: $49.61 Billion
- Forward P/E Ratio: 7.53
As one of the smallest (in terms of market capitalization) major Canadian banks, the Canadian Imperial Bank of Commerce (CIBC) usually trades at a slightly discounted valuation relative to its peers. Founded in 1867, the company is headquartered in Toronto, Canada, and is still a massive Canadian company by market capitalization.
From the bank’s recent financial disclosures, CIBC has roughly 11 million clients and 45,000 employees, as well as roughly 3,000 ATMs and 1,000 branches spread out across Canada.
CIBC’s day-to-day operations are split into four main segments:
- Canadian business and personal banking
- Canadian wealth management and commercial banking
- US wealth management and commercial banking
- Capital markets
The bank’s stock trades under the ticker CM on both the New York Stock Exchange as well as the Toronto Stock Exchange.
Since CIBC has a smaller number of clients and a marginally smaller presence within Canada, the stock’s valuation metrics are slightly less expensive relative to larger peers (such as TD or RBC). CIBC pays a very attractive forward dividend yield to investors.
If you are looking for an inexpensive bank stock to include within your portfolio as a long-term investment, CIBC stock is a great choice to consider.
4. Dollarama Inc.
- Ticker: DOL.TO
- Size: Large Cap
- Valuation: Growth
- Forward Dividend Yield: 0.28%
- Dividend Payout Ratio: 8.45%
- Dividend Yield (12-Month Trailing): 0.26%
- Upcoming Dividend Date: Nov 03, 2023
- Market Cap: $27.77 Billion
- Forward P/E Ratio: 25.79
Started in 1992 by Larry Rossy, Dollarama underwent its IPO in 2009 and is a provider of generic, low-cost retail goods. The company is headquartered in Montreal, Quebec, and had roughly 1,444 stores across Canada as of the middle of 2022.
Dollarama’s shares are available to trade on the Toronto Stock Exchange under the ticker DOL. As of 2022, the company had over 8,000 employees.
As of the beginning of 2022, Dollarama had approximately 8,000 employees across Canada. The company was initially selling products at a price of $1 or less, increasing this to $5 or less several years ago. This is helping the company to offset rising costs and strengthen its margins.
Dollarama’s stock trades at growth stock valuation multiples, meaning that future growth prospects are looking good for the company. It currently pays investors a fairly low dividend yield, opting instead to reinvest profits into the business. The company’s shares have rewarded investors with excellent returns since its IPO.
Dollarama is a great company to consider investing in for the long term here in Canada.
5. Capital Power Corp
- Ticker: CPX.TO
- Size: Mid Cap
- Valuation: Core
- Forward Dividend Yield: 5.33%
- Dividend Payout Ratio: 211.67%
- Dividend Yield (12-Month Trailing): 6.43%
- Upcoming Dividend Date: Jan 31, 2024
- Market Cap: $4.26 Billion
- Forward P/E Ratio: 12.43
Capital Power Corporation produces wholesale power with a good emphasis on sustainable energy. With headquarters in Edmonton, Alberta, the company owns, builds, and operates renewable and thermal energy facilities.
The company’s facilities are widespread across Western Canada, Ontario, and the US:
Capital Power Corp operates 27 facilities across North America with a power generating capacity of 6.6 gigawatts. The company is currently working on projects that should further increase capacity by roughly an additional 900 megawatts.
Capital Power Corp is aiming to be entirely coal-free sometime in 2023. The company has raised its dividend each year (over the past 9 years) and is aiming for a dividend yield of roughly 6% per year until 2025.
Approximately 85% of the company’s capacity is under long-term contracts with high-quality counterparties. These contracts have expiration dates that range between 2030 and 2035.
The company currently trades under the CPX ticker on the Toronto Stock Exchange. Its stock currently offers investors an attractive forward dividend yield, making it a good choice for income-oriented investors.
If you are looking to add energy exposure to your portfolio, Capital Power Corp is a good option for long-term investing.
How to Buy Stocks in Canada
Canadian investors currently have three ways of purchasing stocks in Canada:
- Trading stocks by yourself through a self-directed brokerage (also known as a discount brokerage)
- Using a Robo-advisor
- Working with a financial or investment advisor
Partnering with an advisor is the most expensive option in terms of fees. If this is the case, you will likely be paying two types of fees: product fees (MERs) as well as advisory fees. Advisory fees are sometimes blended into an investment product’s MER, sometimes only showing investors one combined higher fee.
If you are looking to be entirely in control of your investing and trading, you will have to open an account with one of Canada’s self-directed brokerages. This option comes with the least amount of fees but also with the least amount of professional investing guidance.
The cheapest way to buy stocks is from discount brokers. My top choices in Canada are:
- 105 commission-free ETFs to buy and sell
- Excellent customer service
- Top-notch market research tools
- Easy-to-use and stable platform
- Stock and ETF buys and sells have $0 trading fees
- 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.
Stocks are a great long-term investment asset class if you are trying to outperform inflation and grow your money.
Keep in mind that stocks can be very volatile in the short and medium term – the secret is to stay invested when others are fearful.
If you are a new investor, be sure to read my guide with tips on investing for beginners in Canada.