The 5 Best Canadian stocks to buy in 2024

Canadian stocks aren’t as well-known as many of their counterparts south of the border and therein lies an opportunity for investors. That lack of familiarity, at least among global investors, means that a lot of the stocks of Canadian companies that trade on the Toronto Stock Exchange (TSX) with strong growth profiles are undervalued.

Investors can still get in on the best Canadian stocks with good growth potential at a lower price point and benefit from future price growth. It’s important, though, to limit your risk, so we’ve chosen Canadian stocks with sound balance sheets, plenty of free cash flow and dependable dividend growth. The last part is significant, because a growing dividend rewards investors that can hold their nerve during short-term share price fluctuations.

Another advantage to the the best Canadian stocks to invest in is they have a greater economic moat because they don’t face as much competition as some US stocks do. On top of that, Canadian companies also benefit from Canada having the fastest-growing economy of all the G7 countries mainly driven by high immigration, according to Statistics Canada.

Here are our picks of the best Canadian stocks to buy right now:

Ticker on TSX	Company	Performance YTD
CSU	Constellation Software	+16.73%
DOL	Dollarama	+31.85%
L	Loblaws Companies Ltd.	+24.67%
CNQ	Canadian Natural Resources	+17.45%
SU	Suncor Energy	+27.65%

An in-depth look at these top Canadian stocks

A quick look at each of the five stocks and what makes them good investments right now. Each of these companies has shown momentum this year, with their shares rising by double-digit percentages, year-to-date.

1. Constellation Software: Average annualized 10-year return of 30.83%

The Toronto-based company has focused on growing by acquiring smaller, profitable software companies. It owns more than 1,000 niche software companies that focus on varied markets, giving Constellation a built-in model of diversification. It focuses on mid-sized or large software companies with more than $5 million in annual revenue that have shown consistent double-digit earnings and growth. The company’s efficiency and stable growth make it a solid choice for investors. Its earnings per share (EPS) has grown by 569% over the past decade.

In fiscal 2023, Constellation (TSX: CSU) had revenue of $8.4 billion, up 26.9% and EPS of $26.67, up 10.3% Nearly all of that growth came from acquisitions as Constellation essentially adds management guidance to its new companies. Over the past decade, it has increased annual EPS by 569.5%. In the first quarter of fiscal 2024, the company continued its growth, revenue was up 23%, year over year, to $2.35 billion and EPS was $4.95, up 11.5% over the same period last year. The company spent $288 million on acquisitions in the quarter.

Constellation kept its dividend at CAD 1 per share, the same as it has been for a number of years, though it has grown by 26% over the past decade.

2. Dollarama: Average annualized 10-year return of 23.33%

The chain of discount stores is Canada’s largest retailer of items $5 or less. Based in Montreal, it has more than 1,550 stores and boasts consistently high profit margins, particularly for a retail company. The company’s brand loyalty and steady growth make it a solid pick for long-term investors.

Dollarama (TSX: DOL) usually locates its stores in areas that don’t face direct competition from grocery stores and, unlike its counterparts in the United States, Canada isn’t saturated with similar stores. The rise of inflation has led shoppers to look for ways to stretch their dollar, so Dollarama’s lower-priced items are in demand. Interestingly, though, part of the reason for the company’s high margins is that it makes a lot of money off of lower-priced discretionary items.

In fiscal 2024, the company reported revenue of $5.86 billion, up 16.1% and EPS grew by 29% to $3.56. The store grew its revenues, both by opening 65 additional stores, but also because same-store sales increased 12.8%. It reported an annual gross margin of 44.5%. By contrast, U.S. company Dollar Tree, which operates the Family Dollar and Dollar Tree chains, saw gross margin of 30.1% in fiscal 2023.

Over the past 10 years, Dollarama has grown EPS by 383.3% and its dividend by 245%. It repurchased $655.9 million worth of shares last year and just raised its quarterly dividend by 29% to $0.920. It also reduced its net debt to $1.95 billion, down from $2.15 billion in fiscal 2023.

3. Loblaws Companies Ltd.: Average annualized 10-year return of 15.49%

The grocery store is ubiquitous, with 90% of the Canadian population within 10 kilometers of the more than 2,400 Loblaw’s stores. The company, as of 2022, had a dominant 29% market share among Canada’s grocers, according to Statista.

Loblaws Companies (TSX: L) has been in the news because of a customer-driven boycott that started May 1 with many consumers angry over the high cost of groceries in the country. The boycott hasn’t had a big impact, though, with the stock rising a little more than 5% over the past month. Its consistently high margins compared to competitors makes it a solid choice for investors.

In the first quarter, Loblaws reported sales of CAD 13.58 billion, up 4.5%, year over year. Food retail rose 3.4%, drug retail increased 4% and the company’s e-commerce sales rose 16.1%. EPS was up 14% to $1.47. Over the past decade, the company’s yearly EPS has risen 4,560%.

That growth has allowed it to raise its quarterly dividend for 13 straight years, including a recent 15% increase to $0.513 per share, giving it a yield of around 1.14%. The boycott may actually help Loblaw’s business going forward as it helped spur it to test smaller-format discount stores in new locations.

4. Canadian Natural Resources: Average annualized 10-year return of 6.81%

Canada’s largest oil producer is headquartered in Calgary but has assets across North America, the U.K. portion of the North Sea and offshore Africa. The company is a strong value stock because of its dividend and because its primary revenue source, its oil sands operations in Alberta, have a life that could last another 30 years. There’s also less dropoff from oil sands reserves compared to shale wells and less maintenance required, so the company has higher profit margins. The company also owns the largest natural gas reserves in Canada.

As of June 10, shares of Canadian Natural Resources (TSX: CNQ) were scheduled to have a 2-for-1 share split, which reduces the price of the stock by half. The company also had a 2-for-1 share split in May of 2021.

In the first quarter of 2024, Canadian Natural saw natural gas production rise slightly, .03%, and oil production grew 1%. Earnings were down, though, due to lower prices for natural gas and oil. The company said it had adjusted EPS of CAD 1.37 ($1.00) compared to CAD 1.67 in the same period a year ago. Company president Scott Stauth said Canadian Natural expects to increase production, realized prices and cash flows for the rest of the year, due to improved crude oil forecasts for the rest of the year.

Canadian Natural has grown its quarterly dividend for 24 consecutive years, including a 5% increase this year to CAD 1.05 ($0.77), equaling a dividend yield of around 4%.

5. Suncor Energy: Average annualized 10-year return of 0.63%

The Calgary company is Canada’s second-largest producer of oil. The company’s shares have been stagnant over the past decade as it has been plagued by operational concerns and safety issues that saw the 13 fatal accidents of employees and contractors over the past decade. However, since appointing a new CEO last year, Suncor appears to have turned a corner.

Suncor Energy (TSX: SU) specializes in producing synthetic crude from oil sands. It also markets and trades in crude oil, natural gas, petroleum products and power. In the first quarter, it reported adjusted funds from operations per share of CAD 2.46 ($1.81), up 8%, year over year. The company reported record upstream production (of 835,000 barrels per day and record refined product sales of 581,000 barrels a day. With higher prices expected for crude oil, those numbers will likely grow, a solid reason to invest in the stock.

Over the past 10 years, it has grown yearly EPS by 240%, and its dividend by 137%, yet it trades just a little more than nine times earnings. The company had $300 million in share repurchases in the quarter and raised its dividend by 5% to CAD 0.545 ($0.40) last year, the third consecutive year it boosted its dividend. The yield is around 3.92%.

Suncor has trimmed its debt from $2.229 billion to $1.35 billion. Suncor’s net debt was CAD 13.5 billion ($9.91 billion), a decrease of CAD 2.23 billion ($1.64 billion) compared to March 31, 2023.

Pros and cons of investing in Canadian stocks

There are plenty of terrific Canadian companies to invest in. Some of the advantages of Canadian stocks include:

A strong, stable economy: Canada’s well-educated population, political stability, and strong regulations create a reliable investment environment.

Dividend Income: Canadian companies are known for consistent dividends, providing a steady income stream on top of potential stock appreciation.

Tax Advantages: Dividend tax credits can shelter some investment income from taxes, boosting returns.

Sector Exposure: Canada is a major resource exporter (oil, gas) and has a strong financial sector. Investing here provides exposure not heavily weighted in global portfolios.

There are some disadvantages of investing in Canadian stocks, including:

Limited Market Size: The Canadian market is smaller than the US market, offering fewer investment options and potentially lower liquidity.

Concentration in Resources: Some of the best Canadian stocks are oil and gas companies but they can be more cyclical and volatile than other industries.

Lower Growth Potential: Compared to some other markets, Canada may offer lower overall growth potential for certain sectors.

Regulation: Canada’s strict regulations can limit innovation and some investment opportunities.

Canadian stocks FAQS

How to invest in Canadian companies and stocks

It is relatively easy to invest in Canadian stocks, whether you live in Canada or elsewhere. You can use an online broker to purchase Canadian stocks online, which is now the most common way of investing in stocks for retail investors. An online broker will allow you to purchase and hold individual stocks.

Another popular method of investing in Canadian companies is purchasing an ETF, which is a bundle of stocks or assets around a central theme, such as mining, technology or health.

Alternatively, you can trade CFDs or futures contracts, although these are considered high-risk and should only be considered by experienced investors.

How to buy Shares of Canadian Companies?

Do your research first: Look at companies listed on Canadian exchanges such as the Toronto Stock Exchange (TSX) and the TSX Venture Exchange (TSXV). One way to find some of the top Canadian stocks is by examining top Canadian financial blogs.

There are also good financial stock tip services and stock screeners and apps that can help in your research. Take a long look at a company’s financial statements, research recent news regarding companies and look at company information on production capacity and future projects. Once you’ve found a stock you like, you can purchase shares through your broker or trading platform.

How to invest in a Canadian ETF (exchange-traded fund)?

Take a look at an ETF’s fees and performance: Canadian ETFs provide diversification through pooling stocks of various industries They offer potentially lower risk compared to buying individual stocks. Again, depending on your broker or trading platform, they have varying fees and performance. Take a look at their five-year and 10-year performance and be wary of ETFs with higher expense ratios.

Do I need to pay taxes on stocks in Canada?

In Canada, you must pay taxes on capital gains from selling stocks, but not on the stocks themselves. The capital gains tax applies when you sell your stocks for a profit and then only 50% of the gain is taxed. Earning a dividend from a Canadian stock will require paying taxes, but at a lower rate because these dividends receive a tax credit that reduces your tax.

Transferring stocks in Canada

Transferring stocks in Canada is generally done through your broker.

Consider if the transfer is between accounts you hold at the same broker or involves different institutions.
Transferring within the same broker is usually simpler.
Contact your broker and inquire about their stock transfer procedures. They will likely provide you with specific forms or instructions.
You’ll need details about the stock(s) you’re transferring, including the number of shares, company name, and ticker.
You’ll need information about your accounts at both the sending and receiving brokerages, including account numbers.
There might be fees associated with the transfer, so inquire with both brokerages about their charges.
Transferring between registered accounts (like RRSP or TFSA) within Canada generally won’t trigger capital gains taxes. However, transferring from a non-registered account to a registered account might have tax implications. Consult with a tax professional for specific advice on your situation.

Methodology

We looked for the stocks of stable, large-cap Canadian companies that have shown consistent earnings growth over the past decade of at least 100%. Secondly, we looked for companies with consistent dividend growth over the past 10 years, partly for the advantages of owning a stock with a dividend but also because it shows consistent cash flow. We also sought out companies with debt-to-EBITDA ratios below 2, as it is an indication of how financially secure a company was as well as how well it could handle an economic downturn.