2 Consistent Growth Stocks to Buy This Year

Growth stocks are often considered more volatile compared to dividend stocks, but there are companies that offer relatively consistent and reliable growth.

| More on:
Upwards momentum

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

Every investor has a different risk appetite, and it’s not as straightforward as having a tolerance for relatively risky stocks. Even conservative investors, who prefer to stick with fundamentally strong companies, might have a higher risk tolerance for companies in sectors/industries that they thoroughly understand.

Similarly, many dare-devil investors might stay clear from businesses and sectors they don’t understand. The attitude is different towards growth and dividend stocks as well. Not all dividend stocks are inherently safe. They are merely preferred, because they offer more consistent and predictable returns, and if they happen to offer some capital growth as well, that’s just the cherry on top.

The same goes for growth stocks. Not all growth stocks are volatile and unpredictable. There are some stocks that offer consistent and reliable growth and have years or even decades of history backing it up. Two such stocks are Toromont Industries (TSX:TIH) and Constellation Software (TSX:CSU).

An industrial stock

Toromont Industries have two core businesses. It has an equipment group that offers an extensive range of Caterpillar heavy equipment and machinery to a wide variety of industries, including infrastructure, construction, power generation, agriculture, and waste management. A diversified clientele ensures that the equipment wing’s revenues don’t go down with one particular sector.

In 2020, almost 90% of the company’s revenues came from the equipment business. The remaining 10% was generated from the second core business — i.e., CIMCO, the refrigeration business.

Toromont is among the oldest Dividend Aristocrats on the TSX. It has grown its payouts for over three consecutive decades, but its dividends often get forgotten in the shadow of its capital growth prospects, which is partly because of the modest 1.29% yield. Toromont’s growth has been quite consistent in the last two decades. And it has returned almost 1,300% to its investors in those two decades.

If the company can sustain its 10-year CAGR of 19.2% for the next couple of decades, it can easily grow your capital several times over.

A software stock

Constellation Software, with a share price of about $1,900, is the most expensive stock currently trading on the TSX. This is the result of over 10,000% growth in the last 15 years. Even if you had invested $10,000 in the company a decade ago, you’d have a nest egg of about $300,000 right now. And the growth has been quite consistent.

Constellation’s 10-year CAGR is even more impressive at 42.3%. That’s enough to double your money in just about two years. The company is in the business of acquiring other businesses. It has two major business segments — the private and public sector — and currently, Constellation’s portfolio consists of six different companies and corporate groups.

Foolish takeaway

Consistent and reliable growth can be a powerful addition to your portfolio. Constellation’s share price might make it relatively undesirable for investors working with limited capital, but it might still be worth considering. These companies might have the potential to propel your portfolio forward at a much faster pace than comparatively conservative (and safer) choices.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Constellation Software.

More on Dividend Stocks

Woman has an idea
Dividend Stocks

2 Low-Risk Growth Stocks Paying Great Dividends

These top TSX dividend stocks give investors exposure to interesting growth opportunities.

Read more »

A person builds a rock tower on a beach.
Dividend Stocks

Got $300? 2 Simple TSX Stocks to Buy Right Now

These two simple TSX stocks have everything a long-term investor looking to dollar cost average into a position wants right…

Read more »

A golden egg in a nest
Dividend Stocks

Millennials: No Excuses! Start Saving for Retirement Right Now.

Millennials, we need to stop complaining and start bragging. We're great savers, so it's time to start investing in TSX…

Read more »

Value for money
Dividend Stocks

3 UNDERVALUED TSX Stocks to Buy in August

Here are some attractively valued TSX stocks for the long term.

Read more »

A young man throwing and catching his daughter above his head
Dividend Stocks

Parents: Double Your CCB Payments This Month!

Parents can use those CCB payments to their benefit and double them this year month after month -- no waiting,…

Read more »

stock market
Dividend Stocks

I’m Buying These 3 Resilient Stocks During a Bear Market

TD Bank stock is among the three stocks I'm buying to protect my portfolio from a bear market and to…

Read more »

edit Safety First illustration
Dividend Stocks

4 of the Safest Dividend Stocks on Earth Right Now

These dividend stocks offer up strong dividends, a cheap share price, and safety from growing, safe sectors of the market.

Read more »

A person builds a rock tower on a beach.
Dividend Stocks

Change Your Future: What to Hold in a TFSA in 2022

Holding dividend growth stocks in a TFSA long-term can change the financial futures of worried Canadians.

Read more »