In investments, when you say blue-chip Canadian stocks, it is often considered one of the safest investments and usually among the best Canadian dividend stocks.
Usually held for long terms, blue-chip stocks are the backbone of an investor’s portfolio. Therefore, those who have recently learned to buy stocks in Canada should focus on making high-quality blue-chip stocks their primary focus.
These stocks provide long-term stability and usually an excellent dividend. This article discusses the top Blue-chip companies in Canada and why they could be a good investment for your portfolio.
What's in the Article:
- Blue Chip Stocks – What are They?
- The Stocks Game: 10 Best Canadian Blue Chip Stocks
- Why Choose Canadian Blue Chips?
- The Stocks Game: Final Words
Blue Chip Stocks – What are They?
Blue-chip stocks are considered more defensive; they can weather storms in the stock market. Moreover, they have a high recovery expectancy because of their established business and strong foothold. Blue-chip stocks are often well-established and have been financially stable for decades.
The Origins of “Blue Chip”
Before we dive into the best blue-chip stocks in Canada, let’s explore the origins of the term “blue chip.” It stems from the game of poker, where blue chips have the highest value and are considered the most important to keep in your stack. With that knowledge, let’s delve into the exciting world of stocks.
The Stocks Game: 10 Best Canadian Blue Chip Stocks
Looking for the best blue-chip Canadian stocks you can add to your portfolio today? You’re in luck! We have got 10 of them today.
Barrick Gold (TSX: ABX)
Barrick Gold is among the most prominent gold stocks globally and has emerged more robust than before. It generates a considerable cash flow, making it one of the most diversified stocks in the industry. One of the world’s largest producers, this Toronto-based company came in with 4.8 million ounces of gold and 460 million pounds of copper in their 2020 production. They also had almost 68 million ounces of gold reserves and have positioned themselves well for future growth.
Furthermore, Barrick Gold has been laser-focused on reducing its debt burden, which has decreased by over 50% in recent years. Regarding blue-chip options in Canada, Barrick Gold’s size and stability are unmatched.
TC Energy (TSX: TRP)
TC Energy is a compelling blue-chip stock in Canada for several reasons. First, the company operates in the essential sector of commodity transportation, providing pipelines and energy infrastructure. This sector is known for its stability and consistent cash flows.
Second, TC Energy has a strong track record of delivering solid financial performance. Despite fluctuations in oil prices, the company has demonstrated resilience and has become less susceptible to damage. In addition, it’s diversified operations and strategic positioning enable it to navigate market challenges effectively.
Third, TC Energy is committed to shareholder value. The company has a history of dividend growth and has consistently increased its dividend payout over the years. This makes it an attractive choice for income-seeking investors.
Lastly, TC Energy has a solid reputation for its responsible environmental practices and commitment to sustainable energy solutions. With the growing focus on ESG (environmental, social, and governance) factors, TC Energy’s sustainable approach positions it well for future opportunities and regulatory requirements.
Overall, TC Energy’s stability, financial performance, dividend growth, and commitment to sustainability make it an excellent blue-chip stock in Canada.
Canadian Pacific Railroad (TSX: CP)
Canadian Pacific Railway has made remarkable strides in the railroad industry. For example, in July 2020, they extended their dividend-growth streak to five years by raising the dividend by 15%. This move was substantial, especially considering several other companies had to cut or suspend dividends due to the pandemic.
Expectations for earnings growth were initially in the high single digits over the next few years, but this growth turned into a chance for acceleration. The company engaged in a feud with Canadian National Railway over the Kansas City Southern purchase. As a result, they recently underwent a share split, making them more attractive to retail investors who couldn’t afford their lofty price tags.
There’s a lot to like about CP Rail. As rail transportation becomes Canada’s primary mode of goods, they form a duopoly with CN Rail. Additionally, CP Rail is a solid defensive stock in light of the current pandemic.
Canadian Apartment Properties REIT (TSX: CAR.UN)
For several compelling reasons, Canadian Apartment Properties REIT (CAR.UN) is an excellent choice for investors looking for a good blue-chip stock in Canada. First and foremost, CAR.UN operates in the resilient and stable real estate sector, specifically in the rental housing market. Rental properties provide a consistent and reliable source of income, making CAR.UN a reliable investment option.
Additionally, CAR.UN has a proven track record of delivering consistent returns to its investors. The company has a suite of affordable rental portfolios, demonstrating resilience and maintaining strong occupancy rates even during challenging economic times.
Furthermore, CAR.UN offers an attractive dividend yield, making it an appealing choice for income-oriented investors. The REIT has a history of increasing its dividend payout over time, showcasing its commitment to providing consistent and growing income to shareholders.
CAR.UN’s inclusion in the STP/TSX 60 Composite Index further highlights its significance as a blue-chip stock in Canada. This recognition underscores the company’s strong market position and status as one of the leading residential REITs in Canada the country.
Lastly, CAR.UN’s valuation metrics, such as trading at a discount to its cash flow value and net asset value, present an opportunity for investors to acquire the stock at an attractive price. This combination of stability, income potential, market recognition, and favourable valuation makes CAR.UN a compelling choice for investors seeking a good blue-chip stock in the Canadian real estate sector.
BCE Inc – Bell (TSX: BCE)
BCE Inc is one of Canada’s largest telecom companies, often grouped with the “Big 3” – Telus, Rogers, and Bell. They are known for their practical product innovation and for providing the fastest network possible to Canadians. With 9 million subscribers, BCE has a solid customer base.
BCE is considered one of the best Canadian income stocks, yielding a dividend north of 5.5% and boasting a 12-year dividend growth streak. With a market capitalization of over $54B, BCE is a blue-chip stock that has demonstrated consistency and reliability for over a decade.
Metro (TSX: MRU)
Metro Inc. (TSX: MRU) is a prime example of good blue-chip stock in Canada for several compelling reasons. First and foremost, the company has showcased resilience and stability, particularly during challenging times like the COVID-19 pandemic. As one of Canada’s largest grocery retailers, Metro’s stable business model, consistent revenue generation, and strong market position contribute to its reliability as a blue-chip stock.
Investors seeking income-oriented opportunities will find Metro appealing, as the company has an impressive 26-year dividend growth streak. This demonstrates its commitment to returning value to shareholders by consistently increasing its dividend over time.
Market dominance is another key factor that sets Metro apart. The company holds a significant market share in the Canadian grocery industry, operating under well-known banners such as Metro, Super C, and Jean Coutu. It’s strong customer loyalty and extensive store network contribute to its market dominance and long-term sustainability.
Metro also stands out due to its strategic expansion and innovation initiatives. The company actively pursues acquisitions, partnerships, and investments to enhance its offerings and improve operational efficiency. Its focus on e-commerce and digital transformation ensures Metro remains responsive to evolving customer preferences and stays ahead in the competitive retail landscape.
Moreover, Metro benefits from its consumer-defensive nature. As a provider of essential goods, the company is considered resilient during economic downturns or periods of market volatility. This characteristic provides additional stability to Metro’s performance, making it an attractive choice for investors looking for consistent returns.
Metro’s resilience, consistent dividend growth, market dominance, strategic expansion, and consumer defence makes it a compelling blue-chip stock in Canada. Investors seeking a reliable and steady investment option in the grocery retail sector can find value in Metro’s strong business fundamentals and track record of success.
Constellation Software (TSX: CSU)
The technology sector is still significantly under-represented on the TSX Index compared to the markets in the United States, where technology constitutes almost a quarter of the known markets. However, there is one company that qualifies as a genuine blue-chip Canadian stock.
That company is Constellation Software, one of the best-managed companies on the TSX Index. Over the past decade, its stock prices have soared by more than 3600%, showcasing one of the best track records in the tech industry. Moreover, while it pays a modest dividend, its capital appreciation more than compensates for the lack of income. Ten years ago, a $10,000 investment in the company would be worth over $350,000 at the time of writing.
Constellation is the best consolidator in the tech industry, with a knack for acquiring other companies and seamlessly integrating them. In addition, the pandemic has accelerated the world’s shift to technology, making tech stocks like Constellation top performers in the past year.
However, investing in Constellation requires complete trust and support in its management. The company doesn’t hold quarterly conference calls but provides annual letters to shareholders. So far, placing trust in its leadership has been a winning proposition. While its share prices frequently trade in the $1900+ range, making it challenging for investors with small portfolios, fractional shares or a potential share split could make Constellation more appealing to investment beginners.
Canadian National Railway (TSX: CNR)
The largest railway company in the country, Canadian National Railway, has become a no-brainer among the top blue-chip stocks in Canada. Having over 33,000 kilometres of track, CN Rail’s engagement is dedicated to transporting forest, grain, coal, sulphur, fertilizer, and automotive parts, among others. Moreover, CN is a company that has dividends growing at an impressively fast pace. It has a remarkable dividend growth streak of 25 years, with a five-year dividend growth rate of 12.97%. Unfortunately, this growth resulted in the stock’s consistent rise in price and a low yield. Don’t worry – CNR may lack yield, but it substantially makes up for capital appreciation.
Over the past ten years, CNR has returned more than 386% to its investors. This kind of performance out of some large-cap, blue-chip companies is awe-inspiring. CP Rail and CN Rail are some of North America’s best railways, so they both made this list. In addition, they are the only sector that featured two companies on this list, proving their strength.
Before their infamous Kansas City Southern fiasco, CN Rail had been doing good and performing exceptionally over the last year. And now, with things seemingly settling in terms of their deal, CNR is slowly starting to regain its outstanding performance despite having a short-term slump of a mess. That KC Southern situation will take more or less a year before everything is resolved, and the feud between the Canadian railways is highly likely to continue. However, CN Rail’s acquisition attempts have already been shut down, with the likelihood of the railroad not making the acquisition.
The said dip in price due to the acquisition reminded us how Carrefour’s Alimentation Couche Tard acquisition failed. After releasing this acquisition, it took a little over three (3) months for Couche-Tard to recover from its 20% dip in price. Moving forward, despite the size, CN Rail has been able to adapt, eventually, re-route and focus operations more on those customers that ran other essential services. Their handling of the pandemic has been somewhat rightfully lauded based on opinions from industry experts. Investors are indeed in good hands with CN Rail, and those short-term negative sentiments because of the acquisition attempt will, in our eyes, be forgotten immediately.
Nowadays, Canada’s railways have become and are looking expensive. But even before, they have always looked expensive. So if you’re looking to add, timing the CN or CP Rail market will likely be a wasted effort. So instead, scoop them up and tuck them into the core holdings of your portfolio.
Royal Bank of Canada (TSX: RY)
The Royal Bank of Canada (RBC) is one of Canada’s most popular bank stocks. As a global enterprise with operations in Canada, the United States, and forty other countries, RBC has been declared one of Canada’s most valuable brands for six consecutive years. Known for its customer satisfaction, RBC has a market capitalization of almost $180B, making it one of the best blue-chip stocks to add to your portfolio.
RBC offers a strong dividend yield of over 3% and boasts a decade-long dividend growth streak. Its dividend has been increasing at an impressive pace, with a five-year growth rate of around 6.5%. While the pandemic has posed challenges for banks, RBC and other major Canadian banks have remained the safest income stocks, better than expected regarding dividends and earnings.
As we recover from the pandemic and restrictions ease, there is a high chance that dividend growth restrictions will be lifted. As a result, RBC and other significant Canadian banks will likely raise dividends soon. In addition, the company’s international exposure and sheer size were highlighted during the COVID-19 pandemic, solidifying its position as one of the most reliable Canadian stocks in 2020. Of course, you can’t go wrong with any of the Big Five banks in Canada, but RBC stands out as one of the best.
Fortis (TSX: FTS)
No blue-chip stock list doesn’t have Fortis. If there is, it may not be that reliable, or you can keep looking. Fortis is among the top 15 North American utilities, with over ten (10) utility operations under its supervision in Canada, the United States, and the Caribbean. The highly regulated utility industry often leads to consistent cash flows. And as the population keeps increasing, energy demands will grow, positioning utility companies to profit.
For 48 years, Fortis has had the second-longest dividend growth streak in the country, cementing it as one of the best investments in Canada and, no doubt, a sure bearer of the blue-chip title. It yields over 3.5%, with the company growing dividends at a 5-year rate of 6.79%, having payout ratios of under 60%. So, what is the eventual and helpful good news here? Fortis recently made extensions for its targeted annual dividend growth rate of 6% by 2025. So, investors can expect a significant 6% yearly rise in dividends in each of the next five years. Unfortunately, transparency and reliability are rare and quite hard to find nowadays. In addition, the rising interest rates seemed to have no negative consequences for the stock price of Fortis over the last few years. Thus, Fortis and its stocks are as close to a set-and-forget investment as possible.
Why Choose Canadian Blue Chips?
Investing in Canadian blue-chip stocks offers several compelling reasons. Here are five key factors that make Canadian blue-chip stocks an attractive choice:
- Stability and Reliability: Canadian blue-chip stocks are known for their strength and reliability. These companies are often well-established, financially sound, and have a proven track record of weathering market downturns. In addition, their ability to withstand economic challenges and maintain consistent performance over the long term provides investors with a sense of security.
- Dividend Income: Many Canadian blue-chip stocks are known for their dividend-paying capabilities. These companies often have a history of distributing regular dividends and are committed to providing shareholders with a steady stream of income. Dividend income can be particularly appealing for income-oriented investors seeking reliable cash flow.
- Global Exposure: Several Canadian blue-chip stocks have significant international operations, allowing investors to benefit from global market opportunities. These companies have exposure to diverse economies and sectors, providing diversification and potential for growth beyond the domestic market.
- Regulatory Environment: Canada has a stable and well-regulated business environment, which is conducive to the success of blue-chip companies. The country’s robust regulatory framework and investor protections create a favourable climate for businesses to thrive, reducing the risk of investing in Canadian blue-chip stocks.
- Strong Economic Fundamentals: Canada boasts a robust and diversified economy with a solid foundation in sectors like finance, resources, technology, and healthcare. Blue-chip stocks in these sectors benefit from Canada’s stable economic growth, skilled workforce, innovation, and access to global markets. Investing in companies that are leaders in these sectors allows investors to tap into the country’s economic strength.
The Stocks Game: Final Words
Ultimately, blue-chip stocks are some, if not the best, investments for anyone. They come from stocks with national reputations for quality, reliability, and operating profitably in good and bad times. So having and owning a few blue chips in your portfolio will be worth your time and money.
But which ones to choose, you ask? That option is for you to discover and explore. Choosing the best stocks always depends significantly on the type of investment you want, specific risks, some age factors, and personal financial choices. However, there is one thing you can assure of – the earlier you start investing, the better you can eventually become. If you start now, your investments will grow much faster and over time with compounded growth. Some suitable investments begin as early as possible, so you see the magic among numbers.
Finally, some investors in the market are passive, mediocre, and aggressive. One thing is for sure, though – by far, blue chip stocks are market-tested and proven adequate repeatedly. In addition, these are the safest investments for all types of investors out there.