An ideal company is one whose demand either grows over the years or remains constant, at the very least. It is, however, almost impossible to find a stock as solid as the one we will tell you about. Most people stray farther away, searching for an ‘ideal stock’ while overlooking the best option lying right in front: The food sector.
The food industry comprises businesses that mainly sell food and nonalcoholic beverages. It includes grocery stores, food distribution companies, and businesses that sell consumer staples that people eat or drink. It is obvious why food products are an excellent investment option: Every individual wants food to survive, and its demand only increases as the population grows.
What's in the Article:
- Canadian Food Stocks You Should Invest In
- Why You Should Invest in Food Stocks in Canada
- The Bottom Line
Canadian Food Stocks You Should Invest In
Here are six food stocks with the most promising growth prospects for Canadian investors looking for stable investment options. As a result, the food and beverage sector on the stock exchange is often seen as a defensive area.
Premium Brands Holdings Corp owns a diverse portfolio of premier specialty food manufacturing and unique food distribution companies with operations in Canada and the United States. It employs 11,676 employees and operates in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, Nevada, and Washington State.
Premium Brands is involved in specialized food production, premium food distribution, and wholesale enterprises. Specialty Foods, Premium Food Distribution, and Corporate are the company’s business segments. The Specialty Foods segment includes the company’s specialty food production industries, which account for roughly two-thirds of total revenues; the Premium Food Distribution sector comprises the firm’s distribution and wholesale businesses; the Corporate sector encompasses the company’s head office activities, including its accounting and information management. In addition, it is divided into two geographical segments: the United States and Canada.
Premium Brands has earned the reputation of being a “serial buyer” since it has made almost two acquisitions per year starting from the year 2006. Consequently, the company’s earnings have been rapidly expanding, so much so that its CAGR (compound annual growth rate) has been more than 50% during the previous five years.
These facts, coupled together with the almost five-fold increase in the price of food stocks, render analysts really optimistic about the stock moving forward. Premium Brands Holdings Corp. is expected to expand by 13.73 percent in 2021 and 7.89 percent in 2022.
Maple Leaf Foods (TSX:MFI)
Maple Leaf Foods Inc. is a Canadian carbon-neutral, packaged meats and food industry. Agribusiness is also a part of the company’s activities, providing cattle to the meat products industry. The firm is among the largest consumer packaged goods sellers, employing 13,500 people around the globe. It sells prepackaged meats and meals, raw pork, poultry, and turkey goods under trusted brands, including Maple Leaf ®, Maple Leaf Prime ®, Maple Leaf Natural Selections ®, Schneiders ®, Schneiders ® Country Naturals ®, Mina ®, Greenfield Natural Meat Co. ®, Lightlife ® and Field Roast™. The largest markets for this industry are Canada, the United States, Japan, and China, which account for the majority of the company’s revenue.
On February 24, the business released its final set of 2021 results. In 2021, sales climbed 5.1 percent, year on year, to $4.52 billion. Its Meat Protein Group increased sales by 8.1 percent, while its Plant Protein Group decreased sales by 4.7 percent. Regardless, Maple Leaf’s move towards plant-based foods remains an encouraging juncture for the company in the future.
The company promises a dividend yield of 2.828%, paying a quarterly dividend of 0.20 CAD per share. Maple currently holds a market capitalization of 3,405,686,161. Analysts predict a boom in the share prices, although Maple Leaf shares have fallen 5.6 percent in 2022 as of March 7. However, the company is still up 7.2 percent year on year.
Loblaw Companies (TSX:L)
Loblaw Companies Limited is Canada’s largest retailer, offering groceries, pharmacies, health and beauty items, garments, retail store goods, financial services, and digital cellular products and services. Loblaw, its franchisees, and associate-owners employ around 215,000 full- and part-time workers across more than 2,400 shops, with the most extensive retail network in Ontario and significant spread in Quebec and British Columbia, making it one of Canada’s largest private-sector employers. Grocery retailing is the largest business, accounting for 70% of total retail sales, with drugstores accounting for the remainder.
Loblaw, No Frills, the Real Canadian Superstore, and Maxi are established food companies this corporation owns. It expanded into the pharmaceutical business in 2014 by taking over Shoppers Drug Mart. It also manages a financial-services company, providing credit card services, safe investment certificates, and a PC Optimum reward program. George Weston Limited is the firm’s most dominant stakeholder, owning about 52.6 percent of the company’s shares.
If you want proof of Loblaw’s capacity to prosper through recessions, only look to the 2008 global financial crisis and COVID-19 epidemic. At the apex of the 2008 financial crisis, the stock plummeted from the high $30s to $23, and it quickly recovered to pre-crash levels within a few years only. However, during the COVID-19, the stock price actually soared because of frenzied purchasing by buyers. Currently, the company holds a market capitalization of 38,849,267,942 and pays a quarterly dividend of 0.365 CAD per share.
Tyson Foods Inc. (NASDAQ:TSN)
Founded in 1935 and headquartered in Springdale, Arkansas, Tyson Foods is the leading producer of processed chicken and beef in the United States and employs 137,000 people across the globe. It is also the biggest seller of processed pork and protein-based goods under major brands like Tyson®, Jimmy Dean®, Hillshire Farm®, Ball Park®, Wright®, Aidells®, ibp®, and State Fair®, to mention a few.
Tyson sells 81% of its goods through different channels in the United States, including retailers (47% in fiscal 2021), food service (32%), and other packaged food and industrial enterprises (10 percent ). Furthermore, exports to Canada, Mexico, Brazil, Europe, China, and Japan account for 11% of the company’s income.
Early during COVID-19, the meat sector was in disarray because of viral outbreaks forcing the closure of certain processing factories. Although the crisis is over, Tyson’s share price remains low. The meat processor’s stock dropped roughly 30% in 2020, but the company’s long-term prospects remain promising because meat demand is ordinarily consistent, if not growing. It is among the biggest meat producers and sellers, with a market capitalization of 33,674,882,734.
Metro Inc. (TSX:MRU)
Metro is one of Canada’s leading supermarket chains in Québec and Ontario, totalling an annual sales revenue of $18 billion. As a retailer, franchisor, distributor, and manufacturer, the company operate/services a network of approximately 950 food stores under various grocery banners such as Metro, Metro Plus, Super C, and Food Basics. In addition, with the purchase of Jean Coutu in 2018, it now has a sizable pharmacy presence of approximately 650 drugstores, primarily under the Jean Coutu, Brunet, Metro Pharmacy, and Food Basics Pharmacy banners, employing over 90,000 people.
It employs various business methods, although it is most often a retailer, owning individual locations, or a franchiser, licensing its trademarks and selling items to franchisees. In addition, the company serves as a distributor, utilizing its supply chain expertise to help smaller neighbourhood grocery stores. Most of its activities are concentrated in Quebec, with more than 70% of its owned and franchised grocery and medicine stores.
Metro has been the most dependable food stock in Canada for dividend income, seeing astonishing growth for the past 26 years. The dividend growth rate for the past five years averaged 14.2 percent. Although it currently stands at 12%, which is less than its five-year average, it is still rising at a fair rate. As of 2022, Metro pays a distributive of 0.275 CAD per share, promising a dividend yield of 1.601%.
Empire Company (TSX:EMP.A)
Empire Company Limited is a Canadian corporation based in Stellarton, Nova Scotia, dealing in food retailing, investments, and other activities. The food retailing segment, operated by Empire’s affiliate Sobeys, accounts for approximately all of the company’s revenue. This sector owns, affiliations, or franchises over 1,500 shops in ten provinces, operating under retail names such as Sobeys, Safeway, IGA, Foodland, FreshCo, Thrifty Foods, and Lawton’s Drug Stores, and several retail gasoline stations.
Crombie REIT, an open-ended Canadian real estate investment trust, and the Genstar Development Partnership are among the investments under the company’s investment and other activities sector. Empire and its subsidiaries, franchisees, and affiliates employ roughly 134,000 people and have annualized revenues of approximately $29.2 billion and assets under management of about $16.4 billion.
The stock of Empire Company has increased by 10% year to date, up 15% since the same time in 2021. It pays a $0.15 quarterly dividend per share, equating to a 1.409 percent yield.
It holds a market cap of 11,268,308,048, one of the highest among Canadian companies. The earnings per share of 2.78 and the P/E ratio of 15.30 make it a stable investment option.
Alimentation Couche-Tard Inc. (TSX: ATD)
Alimentation Couche-Tard Inc., trading under ATD on the TSX, represents a robust investment opportunity in the retail sector. As a leading global convenience store operator, Couche-Tard boasts a vast network of stores across North America, Europe, and beyond.
The company’s strategic acquisitions and efficient integration of new assets have fueled its impressive growth. Couche-Tard’s focus on expanding its product offerings, including private label brands and fresh food items, aligns with evolving consumer preferences. Its consistent financial performance, strong management team, and ongoing expansion efforts make it attractive for investors seeking a blend of stability and growth potential.
Goodfood Market Corp. (TSX: FOOD)
Goodfood Market Corp., trading under the symbol FOOD on the TSX, offers an intriguing investment opportunity in the burgeoning online grocery and meal kit delivery sector. As one of Canada’s leading online grocery companies, Goodfood has capitalized on the growing e-commerce trend in the food industry, significantly amplified by the COVID-19 pandemic.
The company’s business model, focusing on convenience, quality, and fresh ingredients, caters to consumers’ evolving preferences. With its robust growth trajectory, expansion into new markets, and continuous innovation in product offerings, Goodfood represents a promising investment for those looking to tap into the digital transformation of the traditional grocery shopping experience.
Saputo Inc. (TSX: SAP)
Saputo is one of the top dairy processors in the world and a significant player in the production of dairy products in Canada. The company produces, markets, and distributes a wide array of dairy products, including cheese, fluid milk, extended shelf-life milk and cream products, cultured products, and dairy ingredients. Saputo’s extensive distribution network and strong brand presence make it a significant company in the Canadian agricultural sector. Its stock is publicly traded on the Toronto Stock Exchange.
George Weston Limited (TSX: WN)
George Weston Limited operates through its subsidiaries, primarily in the food processing and distribution sectors. The company has a significant presence in the bakery industry through Weston Foods and also controls Loblaw Companies Limited, Canada’s largest food retailer. George Weston Limited plays a crucial role in the Canadian food supply chain, from production to retail. The company’s diversified operations in food processing and distribution make it a key player in Canada’s agricultural raw materials market. Its shares are also publicly traded on the Toronto Stock Exchange.
Why You Should Invest in Food Stocks in Canada
Frozen foods, grocery products, and food processing units are some of the businesses that showed the fastest growth during the COVID-19 and post-pandemic times. Therefore, it is understandable as grocery retail panders to a broader market.
However, the food industry evades the one fear most successful businesses hold: Accounting anomalies. This means that not only does the sales revenue increase for such companies, but the consequent cash flows also surge, resulting in a well-rounded performance of such stocks on the stock markets and the Canadian Stock Exchange. There are also emerging industries like vertical farming stocks in Canada with good growth potential.
Investing in food stocks in Canada presents a unique opportunity for several compelling reasons, making it an attractive sector for both conservative and growth-oriented investors. Here’s an overview of why the Canadian food industry stands out as a good investment:
- Essential Industry: Food is a basic necessity, making the food industry relatively resilient to economic downturns. Unlike many other sectors, the demand for food products remains stable, providing a level of security to investors, especially during uncertain economic times. Restaurant stocks include stocks in full-service restaurants, fast-food restaurants and snack bars.
- Diverse Market: The Canadian food industry is diverse, encompassing a range of companies from agricultural producers and Quebec maple syrup farms, to packaged food companies and grocery retailers. This diversity allows investors to choose from stocks that align with different investment strategies, whether focusing on stable, dividend-paying companies or those with growth potential in emerging food trends.
- Innovation and Growth: Canadian food companies increasingly embrace innovation, particularly in plant-based proteins, organic products, and health-focused foods. This innovation drives growth and opens up new domestic and international markets. Companies that are leaders in these emerging areas offer the potential for significant long-term growth. There is also innovation in food transportation with TAAS stocks Canada.
- Strong Export Market: Canada is a major exporter of agricultural products, benefiting from its vast arable land and advanced agricultural technology. This export market adds an international dimension to the Canadian food industry, offering exposure to global growth opportunities.
- Stable Dividend Payers: Many companies in the Canadian food sector are known for their stable and often growing dividend payments. This makes them attractive to income-focused investors, providing a steady income stream and the potential for capital appreciation.
- Adaptability to Consumer Trends: Canadian food companies have shown adaptability to changing consumer preferences, such as the increasing demand for organic, non-GMO, and locally sourced foods. This adaptability is critical to long-term sustainability and growth in the industry when dealing with consumer cyclical stocks.
- Regulatory Stability: Canada’s regulatory environment for food safety and quality is among the best in the world, providing a stable operating environment for companies in the sector and confidence for investors.
- Demographic Factors: With a growing population and increasing diversity, there is a continuous demand for various food products in Canada. This demographic trend supports the steady growth of the food industry.
The Canadian food industry offers stability, diversity, and growth potential. Its essential nature, innovation, and adaptability to consumer trends make it an attractive sector for investors looking for security and growth in their portfolios. Food stocks are companies producing and transporting food from farms to the stomach.
Growth metrics and analysts are equally optimistic about this sector as a sustainable investment opportunity. As a result, investors who want to rely on their diversified investment portfolio for passive income should definitely consider investing in these companies.