10 of the Best Blue Chip Canadian Stocks to Buy in December 2024
Investors frequently associate blue-chip Canadian stocks with the top Canadian dividend stocks. However, this connection is not always accurate.
Here is a list of high-quality Canadian blue chip stocks you must look at.
The list is dominated by energy, financial and railroad companies, but this is to be expected as they take up a large majority of the TSX.
What are the 10 best Canadian blue chip stocks?
- Brookfield Corporation (TSE:BN)
- Canadian Pacific Railroad (TSX:CP)
- Shopify (TSX:SHOP)
- Metro (TSX:MRU)
- Canadian National Railway (TSX:CNR)
- Constellation Software (TSX:CSU)
- TC Energy (TSX:TRP)
- Fortis (TSX:FTS)
- Royal Bank of Canada (TSX:RY)
- Canadian Apartment Properties REIT (TSX:CAR.UN)
10. Brookfield Corporation (TSE:BN)
Before the end of 2022, Brookfield Corporation (TSE:BN) was referred to as Brookfield Asset Management. However, the company performed a spinoff of its asset management business and now calls itself Brookfield Corporation.
Its business structure is quite complex, and many beginner investors don’t know where to start. This is because Brookfield has many subsidiaries, ones that investors can purchase on their own.
Brookfield Corporation is exposed to the real estate, infrastructure, private equity, data centers, and even renewable energy sectors.
But investors can instead purchase a subsidiary of the company like Brookfield Renewable Partners (BEP.UN) to get exposure to its renewable energy assets or Brookfield Infrastructure Partners (BIP.UN) to gain exposure to its utility, transport and energy assets, among others.
And as mentioned, they can now access Brookfield Asset Management under the ticker BAM. So, why buy Brookfield Corporation instead? It yields less and is growing slower than a company like Brookfield Renewable Partners.
The simple answer is that you want exposure to the company’s assets. Instead of seeking out a higher yield, you instead want overall returns.
The company’s assets are primarily located in the United States and Canada. Still, it does have exposure in both Brazil and Australia as well. With a market cap of over $87B, this is one of the largest companies in the country and is undoubtedly worthy of its blue-chip title.
Brookfield is a Canadian staple and has consistently rewarded shareholders with market-beating growth. This is due to outstanding management and operating performance.
Although many investors will not be seeking out BN for its dividend as it yields under 1%, it does have an eleven-year dividend growth streak, making it a Canadian Dividend Aristocrat, and it has grown that dividend at a high single-digit pace (7.5%) over the last half-decade.
You will not notice these numbers when you look at BN, however. We are using this data from the old structure, which we feel is acceptable to assign to the new ticker.
This growth rate may change in light of the spinoff, but it will be something we need to keep an eye on.
9. TC Energy (TSX:TRP)
The oil & gas industry was decimated in 2020. However, we saw it recover in recent years, and Canadian investors are looking for blue-chip stocks to gain exposure.
And in our opinion, you may be wise to avoid producers and stick to pipelines. Why? Whether it be TC Energy (TSX:TRP), Pembina Pipeline (TSE:PPL), or Enbridge (TSX:ENB), these are companies that transport various commodities.
They are less susceptible to damage due to fluctuations in the price of oil. Despite its recent struggles, TC Energy is one of the best in the industry. The company recently announced that it will spin off a portion of its business and “split” into two separate companies at the midpoint of 2024.
This spinoff and a discounted valuation should allow for a pretty attractive entry point for Canadian investors.
The company has critical infrastructure across North America and expects to spend ~$7 billion on CAPEX annually. In 2024 and beyond, it expects to place between $7-9B in assets into service annually. The natural gas portion should be the faster growing, but likely lower yielding of the two companies post-spin off.
The company aims to grow the dividend in the mid-single digit range. It has set aside a significant amount of capital for expanding infrastructure. This should secure the long-term safety of the dividend.
TC Energy certainly fits the bill if you are looking for a best-in-class energy company. It is trading at cheap valuations, the company’s juicy dividend yield is well covered, and it has a robust pipeline of growth projects.
This isn’t a blue-chip Canadian stock that will blow you away with outstanding returns. But, it’s going to provide a consistently growing passive income stream.
8. Canadian Apartment Properties REIT (TSX:CAR.UN)
You might be thinking, how can a REIT make a list of blue chip Canadian stocks in light of the current interest rate environment? Let us explain.
Although the sector as a whole is under pressure, specific industries are more stable than others – including those that operate multi-unit residential properties.
Although better-performing names exist in this area, Canadian Apartment Properties (CAP) REIT (TSX:CAR.UN) provides excellent value here.
It has a suite of affordable rent portfolios that is proving to be quite resilient.
CAP REIT is also in strong financial shape. It has a debt-to-gross book value below 40% (a rate below 50% is considered strong), one of the lowest in the industry.
Furthermore, the company’s high-3% dividend yield is well covered, accounting for only 60% of funds from operations. Once again, this is in the top tier of TSX-listed REITs.
The company is currently trading at a double-digit discount to its net asset value and around 20 times funds from operations. In June 2020, the company was added to the S&P/TSX 60 Composite Index, which tracks the most prominent companies by market cap on the TSX Index. It is the only REIT among the Index constituents.
Although it does carry greater risk than most on this list, the risk-to-reward proposition is attractive. Now is the perfect time to start accumulating Canada’s largest residential REIT despite real estate fears.
7. Canadian Pacific Railroad (TSX:CP)
Railroads are the bellwether for economic activity, and the Canadian Pacific Railway (TSX:CP) has made a dramatic move forward.
Pre-2012, the company had significant operational issues, leading to many tough decisions. The turnaround has been nothing short of astounding.
Over the past five years, it has outperformed its larger peer (CN Rail), transforming itself from the lowest-margin railroad to the highest of all publicly listed North American railroads.
If you are an investor who seeks consistent dividend growth, then you may need to look elsewhere. While CP Rail has not cut its dividend, it has gone through several periods of stagnation.
Case in point, this past year, CP Rail’s seven-year streak came to an end as it failed to raise the dividend. However, one must take note that it made the largest acquisition in company history with the acquisition of Kansas City Southern – which was a hotly contested battle between itself and CN Rail, which was also gunning for the asset.
In the end, CP Rail was successful, and the company’s growth has a chance to accelerate as a result.
The railways can certainly dip depending on the likelihood of an upcoming recession. However, despite this, analysts figure the company will be able to grow earnings at a double-digit rate well into 2025.
There isn’t much not to like about CP Rail. It forms a duopoly with CN Rail, and rail is the primary means of transporting goods across the country. Despite severe economic uncertainty, it is also proving to be a solid defensive stock.
6. Shopify (TSX:SHOP)
We are going to go out on a little bit of a limb here and talk about Shopify’s status as a blue chip. The reality is Canada has very few reliable tech options, and we all know technology continues to accelerate at an unprecedented pace.
With that in mind, we decided that Shopify (TSX:SHOP) and its $133B market cap are worthy of inclusion on the list. In fact, it is the third-largest company on the TSX Index, behind only Royal Bank and TD Bank.
Shopify’s rise to prominence is a direct result of the company’s dominant position in the e-commerce space. Over the past decade, Shopify’s stock price has gone up by more than 3,000%, and a $10,000 investment would be worth $332,000 today.
The company’s stock price got ahead of itself during the euphoria of all things e-commerce-related during the pandemic. After a valuation reset, the stock has once again started to regain favour among investors.
It’s also worth noting that it was market FOMO that pushed the stock up to unrealistic levels – in terms of performance, Shopify has always executed quite well.
Shopify has set itself apart by distinguishing itself through a merchant-centric business model that prioritizes the branding and independence of its users over the consolidation of a marketplace.
This approach diverges from that of platforms like Amazon, where the marketplace’s identity often overshadows individual sellers. The strategy worked as more than 1.7 million businesses utilize its platform.
Shopify’s growing market share among the top e-commerce sites makes it one of the most attractive tech stocks in Canada and on the planet. It’s rare for a Canadian-based tech stock to command blue-chip attention, but Shopify is certainly deserving of this distinction.
5. Metro (TSX:MRU)
Not surprisingly, as the economy shut down, we still needed our necessities. The consumer staple sector remained strong, particularly among grocery stocks. One of the country’s best is Metro (TSX:MRU).
Quickly looking at its long-term chart will tell you everything you need to know. Metro is a pillar of consistency: nothing flashy here, just consistent and reliable growth.
The company’s low yield may be a turn-off for some, but it is one of the best dividend growth stocks in the country.
Metro’s 29-year dividend growth streak is tied for the 7th-longest streak in the country. It is one of the few in the leading 10 to have consistently raised by double-digits over the past three-, five–, and ten-year periods.
Even in a post-pandemic and post-shutdown environment, it is clear that consumer activity and purchasing habits have changed forever. Metro could likely see less foot traffic through its doors. Still, there is a higher volume per purchase as consumers have learned over the pandemic to shop more efficiently.
Another habit? E-commerce. And this is a space that Metro is growing in rapidly. The company’s online sales are seeing triple-digit year-over-year growth.
This growth is likely to slow a bit in a post-pandemic world, but there is no question that consumer habits have changed. Some will make a permanent shift to e-commerce ordering due to convenience. As a result, we’d still expect significant growth in the company’s online sales moving forward.
And finally, in periods of rising inflation, a company like Metro has the chance to outperform. Consumer defensive stocks like Metro tend to outperform pure-growth plays in rising rate & inflationary environments like we are now.
4. Canadian National Railway (TSX:CNR)
Canadian National Railway (TSX:CNR) is Canada’s largest railway company and has become a no-brainer when referencing the top blue-chip stocks here in Canada.
With over 33,000 kilometres of track, CN Rail is engaged in transporting forest, grain, coal, sulphur, fertilizer, automotive parts, and more.
CN Rail is a company growing its dividend at an impressive pace.
It has a dividend growth streak of 27 years and a five-year dividend growth rate of 12%. However, the stock’s consistent rise in price has resulted in a low yield.
Don’t fret. The company may lack in yield, but it makes up for that in capital appreciation. Over the past decade, it has returned more than 260% to investors. This type of performance from a large-cap, blue-chip company is quite impressive.
Simply put, CP Rail and CN Rail are some of the best railways in North America, which is why they’re both on this list. They’re the only sector that features two companies on this list. That is how strong they are.
We expect cash flow to be relatively consistent even in a recessionary environment. CN Rail moves a lot of critical material across the country. Despite its size, CN Rail has been able to adapt, re-route and focus operations on those customers that ran essential services.
Investors are in good hands with CN Rail, and the short-term negative sentiment due to a potential recession will be short-lived.
Right now, Canada’s railways look expensive. However, they’ve always looked expensive. If you want to add, timing the market on either CN or CP Rail will likely be a wasted effort. Just scoop them up and tuck them into the core holdings of your portfolio.
3. Constellation Software (TSX:CSU)
Although it is starting to make headway, the technology sector is still under-represented on the TSX Index.
Unlike south of the border, where tech makes up almost a quarter of the markets, the industry still accounts for only a single-digit weighting on the TSX Index.
This is up notably from the 3% it accounted for half a decade ago. Yet, only one company could qualify as a blue-chip Canadian stock.
And that is Constellation Software (TSX:CSU). Constellation is one of the best-managed companies on the TSX Index.
Over the past ten years, its stock price has soared by over 1470%, and it has one of the best track records in the industry. It pays an almost non-existent dividend. However, that is intentional, as this company is an acquisition machine and chooses to reinvest cash flow instead.
A $10,000 investment in the company 10 years ago would be worth over $157,000 at the time of writing – and this is without commanding some of the crazy valuations of today’s high-growth tech stocks.
Constellation is, simply put, the best consolidator in the industry. It has a knack for acquiring companies and seamlessly bringing them into the fold. It is also essential to recognize that tech is becoming a defensive play in this new environment.
Despite being a technology stock, the company is performing nearly in line with most major indexes. It is one of the best-performing Canadian technology companies in this tech bear market.
It is, however, a company that requires complete trust in management. It does not hold quarterly conference calls and only provides an annual letter to shareholders. You are putting your trust in management; thus far, it has proven to be a winning proposition.
It also has a high share price as it nears a $4,000 price point. This does make it extremely hard for beginner investors with a small portfolio to purchase the stock. It presents a concentration risk if you only have $5,000 or $10,000 to start with.
Fractional shares on a platform like Wealthsimple or a potential share split could make Constellation more attractive to those just starting out.
2. Fortis (TSX:FTS)
You won’t find a Blue Chip stock list that doesn’t contain Fortis (TSX:FTS) – at least, you shouldn’t. If you do, maybe keep looking.
This Canadian company is among the top 15 utilities in North America. It has over ten utility operations in Canada, the United States, and the Caribbean.
The utility industry is highly regulated, often leading to consistent cash flows.
As the population keeps growing, energy demands will increase, and utility companies are positioned to profit.
Fortis has the second-longest dividend growth streak in the country at 50 years. This proven track record has cemented the company as one of Canada’s best investments and worthy of its blue-chip title.
Yielding around 4.5%, the company has grown the dividend at a 5-year rate of 6.1% with a dividend payout ratio of under 60%. The good news?
Despite rising interest rates, Fortis recently extended its targeted annual dividend growth rate of 4-6% to 2028. That means investors can expect a yearly raise to the dividend in each of the next few years.
That type of transparency and reliability is rare. It will be interesting to see if this company can hit this guidance with rates as high as they are.
Utility companies rely heavily on debt to finance capital investments. As such, these companies are prone to setbacks when interest rates rise. You need to keep an eye on this if you’re looking to invest in a Canadian blue chip stock like Fortis.
However, even if the BoC were to continue to raise rates, Fortis has historically been impacted the least out of all regulated utilities. Less than 5% of its overall debt is at a floating rate, meaning 95% of it is fixed at much lower rates for the time being.
With a beta of 0.2, the stock trades more like a bond, and its low volatility will prove vital if a recession hits.
Fortis’ stock is as close to a set-and-forget investment as you can get.
1. Royal Bank of Canada (TSX:RY)
The Royal Bank of Canada (TSX:RY) is probably one of the most popular stocks here in Canada.
The company is a global enterprise with operations in Canada, the United States, and nearly 40 other countries.
The company has been named one of Canada’s most valuable brands for six years, and its reputation regarding customer satisfaction is second to none.
With a market capitalization of over $186B, Royal Bank is one of the best blue chip stocks to add to your portfolio today.
The company’s dividend is strong, with a yield typically in the mid-4 % range and a 13-year dividend growth streak. The dividend is also growing at an impressive pace, with a five-year growth rate of over 6%.
The Canadian banking industry is one of the strongest sectors in the country, if not the world. While banks worldwide were slashing dividends and closing their doors during the 2008 financial crisis, all Canadian banks held firm. Although their share prices fell considerably, recovery was quick, and dividends were never cut.
Now that the pandemic is behind us, financial institutions like Toronto Dominion Bank, Bank of Montreal, Bank of Nova Scotia, and RBC have been able to raise their dividends. And they’ve done just that despite a looming recession and potential economic uncertainty. This is a testament to how well-capitalized they are.
Royal Bank’s international exposure and sheer size were highlighted during the COVID-19 pandemic. It has become one of the more reliable Canadian stocks of the last few years. As such, it’s worthy of its blue-chip title.
What are Canadian blue chip stocks?
Our definition of a blue chip stock is that it has a large market capitalization and is a top company in its industry.
Typically, I look for high-quality stocks that are within the top three in terms of performance in the sector, but industries like Canadian banking can have many stocks I consider blue chip even if they aren’t a front runner.
Blue chip stocks are often the backbone of an investor’s portfolio and are held for the long term. Investors, especially those just learning how to buy stocks in Canada, should make high-quality blue-chip stocks their primary focus.
They provide long-term stability and usually (but not always, like I stated above) an excellent dividend.
Why is that?
A “blue-chip” stock is often well-established and financially sound for decades. This differs from growth stocks, as an investment in them often depends on the company’s growth potential, not its previous results and can have extensive price swings over the long term.
An exciting piece of information before we move on to the best blue chip stocks in Canada, though.
Did you know that the term blue chip, when it comes to the stock market, is derived from the game of poker?
Typically, blue chips held the highest value and, as such, were the most important to keep in your stack.