Best Long Term Stocks To Buy Now Canada

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Blue-chip companies are some of the best investments for long-term stocks because of their resilience, growth, and ability to create wealth over long periods. One of the most remarkable and essential maxims of successful investing is finding stocks one can hold for long periods. It helps investors benefit from the magical effects of compounding. However, business in today’s world is ruthless because of the increasing adoption of disruptive technologies and rapid development. This makes finding companies that will survive the test of time and thrive very difficult.

Over the past decade, there has been an explosion of cheap, simple, and low-risk passive investment products such as ETFs and Income Funds that give investors a diversified portfolio of an index or theme. An index is a weighted average of a country or sector’s best companies by size/market capitalization. For example, the TSX Composite is Canada’s flagship index and, by that extension, includes some of the country’s most prominent and resilient businesses.

However, the diversification of indexes reduces returns over time. If an investor is willing to make an effort to analyze blue-chip stocks individually, they can make outstanding returns for themselves. Luckily for us, the best and most resilient blue-chip stocks exhibit specific characteristics that dramatically improve the odds of long-term success.

What Makes a Good Long-Term Stock?

Here are some of the qualities investors must look for in long-term stocks to hold;

  1. Industry – A company’s line of business is essential for its long-term success. Over long periods, technology and disruption have been responsible for entire industries disappearing. For example, the rise of mobile internet and social media has adversely impacted print media companies. A second example is the shrinking brick-and-mortar retail industry due to the rise of e-commerce. Hence, investors must look for companies in sectors with a low disruption threat, such as food and banking.
  2. Barriers to Industry – Companies that operate in industries with high barriers to entry have a substantially higher probability of long-term success as it makes it difficult for other companies to enter the sector and capture market share or erode margins. High barriers to entry can be caused by factors such as capital intensity or government regulation—for example, power and utility companies.
  3. Brand Value/Trust/High Switching Costs – Companies in sectors where brand value and trust are critical determinants of success have a high chance of long-term success because brand reputation takes a lot of time and effort to build. Companies that make products with high switching costs or rigid customer preferences enjoy the same advantage—for example, Canadian bank stocks and cigarettes.
  4. Growth – Companies that are leaders in high-potential sectors like e-commerce have a high chance of long-term success. Their dominant market position in a growing segment allows them to grow significantly faster than the economy. Other examples include telecom because of increasing digitization and connectivity.
  5. Cash Flow Generation – A company’s ability to generate cash is critical to long-term success. There is a reason behind the cash-flow statement being called the most important of the three types of financial statements. Companies with high cash flow enjoy many advantages, such as cheaper debt, the ability to invest in innovation/research and development continues, substantial dividend history/payouts, etc.
  6. Cyclicality – Companies in non-cyclical sectors such as power, food, utilities, and pharmaceuticals have more stable and predictable earnings than companies with discretionary products, thus giving them a higher probability of long-term success.
  7. Permanence – Over a long enough timeframe, technology can disrupt every industry; however, some businesses will stand the test of time. For example, a significant company may or may not exist for 30 years. However, a piece of land or building on a prime street in the capital of a country will indeed exist and have appreciated over time due to inflation and the growth of the economy. The best way to invest in these is a REIT or REIT ETF in Canada.

Canadian Stocks to Hold for the Long-Term

In this article, we will discuss some of the best long-term stocks to buy in Canada –

Bell – BCE (TSX: BCE)

Sector – Telecom

Dividend Yield – 5.32%

Market Capitalisation – C$59.5 billion

BCE is one of Canada’s most prominent conglomerates; its core business is telecommunications. The company is the most significant player in the telco stock oligopoly, including Telus and Rogers. In addition, the company demonstrates multiple characteristics of an excellent long-term investment, such as growth prospects, barriers to entry, low cyclicality, and brand value.

BCE reported revenue growth of 6.4% and net earnings of C$734 million (up 149% YoY). More importantly, the company reported a 75% increase in mobile connectivity users, which will be the key growth driver for the company in the years to come. The company is very well capitalized, with available liquidity of C$5.3 billion. BCE aims to cover 70% of Canada with 5G connectivity by the end of the year, putting it in pole position to dominate in the 5G stocks era, where connectivity is expected to grow multi-fold due to smart devices and IoT.

Canadian National Railway (TSX: CNR)

Sector – Transport and Travel

Dividend Yield – 1.55%

Market Capitalisation – C$11.2 billion

The Canadian National Railway’s objective is to provide Canada with a robust rail and transport infrastructure. The company operates in a heavily regulated sector with high capital intensity, low competition, less cyclicality, and high growth prospects. The CNR has excellent opportunities to grow in the years to come because of the rise of e-commerce. The shift from brick-and-mortar retail to e-commerce is a shot in the arm for the transport sector, as no form of logistics can move cargo at the speed, reliability, and cost of rail.

In Q2, CNR reported revenues of C$3.59 billion and earnings of C$1.38 billion (up 76% YoY). In addition, the company has generated C$1.28 billion in cash flow so far this year. While revenues grew 12%, the company could lower costs by 9%. As a result, the operating margin for the quarter was 61%.

Algonquin Power and Utilities (TSE: AQN)

Sector – Power and Utilities

Dividend Yield – 4.36%

Market Capitalization – C$12.1 billion

Algonquin Power and Utilities are one of the biggest power companies in Canada. This stock is so attractive because it is the industry leader in renewable energy, which is almost definitely the direction of the industry. The company has been growing exceptionally well over the past decade as it has gone up 350% and has also consistently increased its dividend over that period. The power sector has high barriers to entry as it is very capital intensive, government-regulated and green energy has excellent growth prospects. It also exhibits very low cyclicality, similar to any utilities ETF Canada has.

In Q2’21, the company reported revenues of C$527.5 million (up 54% YoY), EBITDA of C$244.9 million (up 39% YoY), and net earnings of C$91.7 million (up 93% YoY).

Metro (ASX: MRU)

Sector – Retail, Pharmacy, and Consumer Staples

Dividend Yield – 1.55%

Market Capitalization – C$15.8 billion

Metro is one of the most recognizable names in Canada as it operates one of the largest retail and pharmaceutical chains in the country. The company has a very identifiable brand, which gives customers quality assurance, which is very important in sensitive products like pharmaceuticals. The company has excellent growth prospects as it makes meaningful efforts to grow its online business. They have a competitive advantage over pure digital players because it is omnichannel with an online and offline presence, thus giving them far more reach and efficiency. The company has compounded wealth at 16% CAGR over the past decade and has consistently grown its annual dividend for the past 25 years.

The company reported a massive 100% YoY growth of C$5.71 billion, EBITDA of C$533 million (up 4.4% YoY), and net earnings of C$252 million.

Royal Bank of Canada (RY.TO)

Sector – Banking

Dividend Yield – 3.34%

Market Capitalization – C$184.5 billion

Royal Bank of Canada is one of the country’s oldest institutions and its oldest bank. RBC has a brand name and reputation second to none; this is a considerable advantage as money is a trusted business. Further, banking is a core sector; without it, an economy cannot function. It is also highly cash-generative. With the wave of digitization that we are in, banks can reach far more customers than ever, and RBC’s strong reputation will play to its advantage. The company has compounded wealth for investors at 11.59% CAGR over the past decade. They pay a quarterly dividend but check out monthly paying dividend stocks.

In Q3’21, the company reported a net income of C$4.3 billion (up 10% QoQ and 19% YoY), EPS of C$2.66 (up 11% QoQ and 19% YoY), and an ROE of 18.6%.

Pembina Pipeline (TSX: PPL)

Sector – Energy Transport (Natural Gas Infrastructure)

Dividend Yield – 6.47%

Market Capitalization – C$20.14 billion

Pembina is one of Canada’s biggest energy companies. While the company does not mine or drill itself, it provides companies with infrastructure and processing facilities. Pembina owns over 18000 km of pipelines and 19 gas processing facilities. The natural gas sector has tremendous room to grow as it is increasingly used to replace thermal coal power plants due to its more environmentally friendly nature. However, the industry is also heavily regulated and very capital-intensive; hence it has high barriers to entry. Further, it has very low cyclicality because natural gas is a core necessity in Canada for heating and cooking purposes. Nevertheless, the stock has delivered 124% to investors over the past decade.

In Q2’21, the company reported C$894 million in revenue (up 15% YoY) and net earnings of C$254 million.

Brookfield Asset Management (TSX: BAM.A)

Sector – Financial Services

Dividend Yield – 0.92%

Market Capitalization – C$111.7 billion

Brookfield is one of the world’s most respected asset management firms. Of late, it has been increasingly active in renewable energy. This company makes a great long-term bet because it is less prone to disruption and has very diversified operations. The company manages nearly US$600 billion of assets across power, renewable energy, infrastructure, debt, private equity, etc. Being a manager of big-ticket investments is unlikely to be disrupted because it is a reputation and relations game that the company cannot automate. Further, the company’s renewable energy endeavours have placed it in good stead to thrive in the years to come.

Brookfield had a rough 2020 due to write-downs on various assets on account of the pandemic. However, the company has bounced back strong, generating a net income of US$2.4 billion and a free cash flow of US$1.6 billion. Further, the company raised US$24 billion of fresh capital over the quarter, US$9 billion for real estate, and the rest for infrastructure/power.

Barrick Gold (TSX: ABX)

Sector – Mining

Dividend Yield – 1.78%

Market Capitalization – C$45.2 billion

Barrick Gold is one of the world’s biggest miners, with 16 mines across 13 countries. The company has a global reputation for being the foremost gold miner globally. Its stellar reputation gives it a significant competitive advantage as authenticity, purity, and quality are essential in a precious metals business like gold. Further, it has a bright future due to its copper business, which is crucial for sustainable tech and decarbonization. The company is also very cash-flow generative as it benefits from operating leverage. Its inflation-adjusted cost price does not go up with the sale price of its products. In a high-inflation world with low interest rates, gold is set to boom over the long term, and so is copper due to demand for EVs, batteries, and turbines.

In Q2’21, the company reported net earnings of $411 million (up 15% YoY). Barrick reported an all-in cash cost of $1087/pound for gold vs. an average sale price of $1802/pound. For copper, the all-in cash cost of $6033/ton vs an average sale price of $10063/ton for copper. This shows the company’s huge margins, cash flow, and profit potential. The business is also unlikely to be disrupted due to high barriers to entry from capital intensity, the permanence of gold and copper as high-demand products, and the company’s reputation.

Shopify (TSX: SHOP)

Sector – E-commerce

Dividend Yield – None

Market Capitalization – C$242.9 billion

Shopify shocked everyone when it gradually ascended to become Canada’s largest company by market capitalization. Shopify is one of the rare breeds of tech companies that scale to profitability relatively quickly. The company operates an e-commerce-as-a-service platform that allows SMEs and corporations alike to build online retail outlets of their own. They provide turn-key company formation, payments management, store design, inventory management, logistics, and digital marketing solutions in one product. The company is the undoubted leader in its field and is touted by some as a future competitor to Amazon. The pandemic came like the wind under the company’s wings, forcing businesses worldwide to digitalize.

Shopify has a multi-tiered operating structure. First, it gets a flat subscription fee from all users, thus giving it a predictable and stable revenue, along with a cut of the Gross Merchandise Value (gross value of all products sold on the platform) and the financial transaction value.

In Q2’21, the company reported revenues of $1.57 billion (up 57% YoY). Subscription fees for the quarter were $334 million (up 70% YoY), and volume-driven expenses were $785.2 million (up 52% YoY). After adjusting for a one-time abnormal gain, the company reported a net profit of $284.6 million (up 119% YoY).

Canadian Apartment Properties REIT (TSX: CAR.UN)

Sector – Real Estate

Dividend Yield- 2.33%

Market Capitalization – C$10.71 billion

Real estate is a must-have investment for every serious investor. REITs are designed to give owners fractional, cheap, hassle-free, yet pure real estate ownership. The real-estate segment is disruption-free mainly because of its nature, the high productivity and potential for land value creation, the permanence of land, and the ever-increasing demand for high-quality real estate. This REIT owns almost 60000 residential units in Canada and over 5500 in the Netherlands. In addition, real estate does particularly well in inflationary periods, such as the one we are in. Learn more about the best REITs in Canada.

In Q3’21, the company reported almost $229 million in operating revenue (up 4% YoY), a 97.2% occupancy rate, and net rental income of nearly $152 million (up 5.9% YoY).

Lightspeed POS

Lightspeed POS, a global leader in cloud-based point-of-sale software, offers a compelling long-term investment opportunity. Its innovative solutions cater to small and medium-sized businesses in retail and hospitality, sectors poised for post-pandemic growth. Lightspeed’s continuous expansion through strategic acquisitions and organic growth, coupled with its focus on technology and customer experience, positions it well for sustained growth. The company’s expanding global footprint and diversification into e-commerce platforms signal strong potential for revenue growth, making it an attractive option for investors looking for exposure to the evolving digital commerce sector.

Brookfield Renewable Partners

Brookfield Renewable Partners stands out as a premier investment in the renewable energy sector. With a diverse portfolio of hydroelectric, wind, solar, and storage facilities, it can benefit from the global shift towards sustainable energy. Brookfield’s strong track record of delivering stable and growing cash flows and its commitment to increasing its renewable energy capacity align with the growing demand for green energy solutions. Its focus on long-term, inflation-linked contracts provides stability and predictability in earnings, making it a solid choice for investors seeking a sustainable and resilient long-term investment.

Long-Term Stocks in Canada: Navigating External Factors and Investment Rationale

Market and Economic Analysis

Investing in long-term stocks in Canada requires understanding broader market trends and economic forecasts. Canada’s economy, characterized by its robust financial sector, natural resource wealth, and growing tech industry, presents unique opportunities for long-term investors. However, it’s crucial to consider global economic conditions, such as interest rate trends, commodity price fluctuations, and international trade dynamics, which can significantly impact Canadian markets.

For instance, the Canadian banking sector, represented by stalwarts like the Royal Bank of Canada, is influenced by domestic interest rate decisions and global financial stability. Similarly, natural resource companies, like Barrick Gold, are sensitive to global commodity prices. The burgeoning tech sector, with companies like Shopify, is affected by international tech trends and competition.

Risks and Challenges

Investing in long-term stocks also involves understanding the risks and challenges specific to each sector:

  1. Technological Disruptions: Telecom, retail, and banking sectors continuously evolve with technological advancements. Companies failing to innovate may fall behind. For instance, e-commerce growth challenges traditional retail models, necessitating adaptability.
  2. Regulatory Changes: Changes in government policies, especially in sectors like banking, energy, and utilities, can impact company operations and profitability. For example, environmental regulations significantly affect energy and mining companies.
  3. Economic Downturns: Economic cycles can impact different sectors variably. While financial and consumer discretionary stocks may suffer during downturns, utilities and consumer staples might show resilience.

Why Invest in Long-Term Stocks in Canada

  1. Diversified Economy: Canada’s economy is well-diversified across various sectors, offering a range of investment opportunities that can withstand different economic cycles.
  2. Stable Financial System: Canada’s financial system is one of the most stable globally, making its financial stocks a safe bet for long-term growth.
  3. Resource Wealth: As a resource-rich country, Canada offers unique investment opportunities in the natural resources sector, which can be lucrative during commodity booms.
  4. Growing Tech Sector: Canada’s emerging tech sector presents growth opportunities, especially in long-term investments, as these companies expand and innovate.
  5. Dividend Yields: Many Canadian long-term stocks, especially in utilities, financials, and energy, offer attractive dividend yields, providing a steady income stream for investors.
  6. Resilience to Global Shocks: Canadian stocks have historically shown resilience to global economic shocks, aided by prudent fiscal policies and a robust banking system.

Investing in long-term stocks in Canada offers a blend of stability, growth potential, and diversity. However, staying informed about external market trends, economic forecasts, and sector-specific risks is essential to make well-rounded investment decisions.

How to Pick Long-Term Stocks to Invest In

Investing in long-term stocks is a strategy that requires careful consideration and a well-thought-out approach. Here are some essential tips and strategies to help you select the right stocks for long-term investment:

  1. Diversification: The cornerstone of any investment strategy, diversification helps mitigate risk by spreading investments across various sectors and industries. For long-term investments, consider a mix of stocks from different sectors, such as technology, healthcare, finance, and consumer goods. This approach helps balance out the risks associated with individual sectors.
  2. Research and Understand the Companies: Before investing, thoroughly research the companies. Look into their business models, revenue streams, competitive advantages, and growth potential. Understanding a company’s fundamentals, including its financial health, management quality, and market position, is crucial for long-term investment.
  3. Look for Sustainable Business Practices: Companies with sustainable and ethical business practices tend to perform better in the long run. Consider companies that are leaders in environmental, social, and governance (ESG) practices, as they are more likely to be resilient and adaptive to changing market conditions.
  4. Consider Dividend-Paying Stocks: Dividend-paying stocks can be a wise choice for long-term investments.  They provide a regular income stream and indicate a company’s financial health and stability. However, before we turn to the best Canadian dividend stocks, a few questions need to be asked to put them into perspective. However, ensure that the dividends are sustainable and backed by strong company earnings.
  5. Assess Growth Potential: While stability is vital for long-term investments, you also want to invest in companies with growth potential. Look for companies that are innovating, expanding into new markets, or have a strong pipeline of products or services.
  6. Risk Management: Understand your risk tolerance and align your investment choices accordingly. Avoid putting all your funds into high-risk stocks. Balance your portfolio with a mix of high-risk, high-reward stocks and stable, lower-risk stocks.
  7. Monitor Macroeconomic Trends: Keep an eye on broader economic trends and market conditions. Interest rates, inflation, geopolitical events, and economic cycles can impact stock performance. Staying informed helps make timely decisions about buying, holding, or selling stocks.
  8. Long-Term Perspective: Maintain a long-term perspective. Stock markets can be volatile in the short term, but quality stocks tend to provide good returns over the long term. Avoid making impulsive decisions based on short-term market fluctuations.
  9. Regular Portfolio Review: Regularly review and rebalance your portfolio to ensure it aligns with your investment goals and risk tolerance. This may involve selling underperforming stocks or buying new stocks to maintain a balanced and diversified portfolio.
  10. Seek Professional Advice: If you’re unsure, consider seeking advice from financial advisors. They can provide personalized advice based on your financial goals and risk tolerance.

By following these strategies, you can make more informed decisions and increase your chances of success in long-term stock investing. Remember, patience and a disciplined approach are critical to long-term investment success.

Final Thoughts

These are some of the best long-term stocks to buy right now and solid investments for your portfolio tracker in Canada. These may be a great place to start if you are looking for how to invest in stocks in Canada. In today’s world, bank savings rates lag inflation, which means the traditional formula of saving in the bank till retirement will erode wealth, thus making personal finance extremely important. While ETFs and Income Funds are great for passive and hands-off wealth creation, investing in the right stocks can be extremely rewarding for those willing to make an effort. We hope you like this article and consider investing in some of these companies.

Also, check out monthly income investments you can try or the best DRIP companies in Canada. If you are a novice looking to buy shares in Canada, we recommend using Questrade or Wealthsimple to trade. You can also hold shares through exchange-traded funds (ETFs) purchased through a brokerage platform or a Robo-adviser.