The Top Canadian Industrials Stocks to Buy in December 2024

The industrials sector in the TSX has recently seen a boom, thanks to a number of leading companies driving growth and profitability. This increase in Canadian industrial stocks has caught the attention of many investors, eager to take advantage of the country’s expanding economy.

Many industrial stocks also tend to be top-tier Canadian dividend stocks. Because most of them are growing relatively quickly, not too many have a high dividend yield. However, plenty is growing the dividend at a double-digit clip, more than making up for the lack of yield.

We have some of the world’s largest railways, garbage collection companies, steel manufacturers, and more. Although we may not have the largest economy, many of the most prominent industrial companies here in Canada have exposure not only here but in the United States as well.

Some in the Canadian industrial sector even have exposure in Europe and other international countries.

The United States is home to some of the finest industrial companies in the world, with names like General Electric (GE), Boeing (BA), Union Pacific (UNP), and Caterpillar (CAT) all trading in the United States. These are great companies; however, here in Canada, we also have some great industrial names. 

In this article, we’ll spend some time discussing industrial stocks, plus review some options you could consider adding to your watchlist today.

Let’s go over some of the best.

What are the top industrial stocks in Canada?

• Canadian National Railway Company (TSE:CNR)
• Canadian Pacific Kansas City Stock (TSE:CP)
• GFL Environmental Stock (TSE:GFL)
• TFI International Stock (TSE:TFII)
• Savaria Stock (TSE:SIS)

Canadian National Railway Company (TSE:CNR)

Canadian National Railway (TSE:CNR) is a transportation company that operates a network of railroads in Canada and the United States. The company’s revenue comes from transporting freight, including intermodal containers, bulk goods, and automotive products.

CNR has a strong track record of growth and has consistently increased its dividend over the years.

With a market cap of just shy of $110B, it is one of the largest companies on the Toronto Stock Exchange. It is often a leading indicator of the direction of the Canadian economy.

A consistently attractive dividend payout ratio and robust free cash flow generation have led to a multi-decade dividend growth streak. In addition, it has been one of the best-performing Canadian stocks of the past twenty years.

No matter how much technological advancements accelerate, there seems to be nothing that will ever take over railways when it comes to transporting goods. For this reason, we can expect the company’s cash flows to remain consistent and earnings to grow.

Canadian Pacific Kansas City Stock (TSE:CP)

Canadian Pacific Kansas City (TSE:CP) is another transportation company that operates a network of railroads in North America. CP is one of the largest railways in Canada and has a market capitalization of over $100B. So, it’s not as big as Canadian National, but it’s close.

The company’s revenue also comes from transporting freight, including grain, coal, and intermodal containers.

The company recently made a large-scale acquisition of Kansas City Southern, which caused the company to change its name from Canadian Pacific Railway to Canadian Pacific Kansas City.

Canadian National and CP Rail had a back-and-forth battle for quite some time regarding the acquisition of Kansas City Southern, with CP Rail coming out on top.

It should be able to utilize this acquisition to expand its assets south of the border and drive further growth. Despite rough economic conditions, analysts expect the company to post solid earnings and revenue growth over the next few years.

GFL Environmental Stock (TSE:GFL)

GFL Environmental (TSE:GFL) is a waste management company that provides services in Canada and the United States.

The company’s revenue comes from collecting, transporting, and disposing of waste. GFL has a strong track record of growth and has recently expanded its operations.

Waste collection is a relatively defensive business. No matter the economic circumstances, people need their trash disposed of and their recycling taken care of. The only portion of these cyclical waste collection businesses is maybe a bit of their oil and gas exposure.

Its solid waste management business line, which generates most of the revenue, consists of collecting, transporting, transferring, recycling, and disposing of non-hazardous solid waste.

GFL is a relatively new company in publicly traded options. With a market cap of around $17B, it is much smaller than its competitor Waste Connections, so there is likely more room for growth.

TFI International Stock (TSE:TFII)

TFI International (TSE:TFII) is a transportation and logistics company that provides services in Canada, the United States, and Mexico.

The company’s revenue comes from transporting freight, including truckload, less-than-truckload, and package and courier services.

The company thrived in a pandemic-riddled world, buying up struggling trucking companies for pennies on the dollar.

As a result, it has now evolved into one of the largest trucking companies in North America. Although the company drives most of its revenue from right here in Canada, key acquisitions, like UPS Freight, have also allowed it to grow rapidly in the United States.

Many investors avoid trucking companies due to their cyclical nature. However, the rising popularity of e-commerce platforms and the company’s ability to charge fuel surcharges to protect itself from rapidly rising fuel costs will likely allow it to perform well in various economic conditions.

Savaria Stock (TSE:SIS)

Savaria (TSE:SIS) manufactures accessibility products, including stairlifts, elevators, and wheelchair lifts.

It is a small-cap stock in Canada that many Canadian investors own as a play on the aging population here in Canada.

Why? Because Savaria primarily builds things like stairlifts and vehicle aids for the senior population.

It has operations not only in Canada but also in Europe through a notable acquisition of Handicare, a European accessibility company.

Although the acquisition cost Savaria a lot of money and took on a large amount of debt, it should be beneficial over the long term.

The company does pay a dividend and has grown it quite regularly. However, payout ratios are consistently tight in terms of earnings, and dividend growth was paused in 2023. Analysts do expect the top and bottom lines to increase in 2024, which should bode well for dividend growth.

Understanding industrial stocks

Industrial stocks refer to companies involved in manufacturing, construction, engineering, communications, utilities, aerospace, defence, industrial products, and other related industries.

These companies produce goods and services that other businesses or consumers use.

There are different types of industrial stocks, including:

• Cyclical industrial stocks: These stocks are highly influenced by economic growth and tend to perform well during periods of expansion. Examples include companies that produce durable goods like automobiles and appliances. It can also be construction-based companies, like WSP Global (TSE:WSP) or Stantec (TSE:STN)
• Defensive industrial stocks: These stocks are less sensitive to economic cycles and tend to perform well during periods of economic uncertainty. Examples include companies that produce essential goods and services like utilities, healthcare, or military defence companies like US company Lockheed Martin (LMT).

Importance in the Canadian economy

The industrial sector plays a crucial role in the Canadian economy by providing jobs and contributing to economic growth. According to Statistics Canada, the manufacturing sector employs over 3.9 million Canadians.

Investing in industrial stocks can expose investors to this important sector of the economy. However, it is essential to carefully evaluate each company’s financial health, competitive position, and growth prospects before investing.