If I could press the reset button for my stock portfolio, I would have started investing with these Canadian stocks. They have a solid history of operation and provide portfolio diversification.
Brookfield Infrastructure stock
First, there’s utility stock Brookfield Infrastructure Partners (TSX: BIP.UN) that’s a perfect Tax-Free Savings Account (TFSA) holding for growing passive income. It’s a globally diversified infrastructure company across utility, transport, midstream, and data infrastructure assets.
It has been increasing its cash distribution, since it began listing independently in 2008. For reference, its five-year cash-distribution growth rate is 6.6%. Management targets returns of 12-15% on its investments. This has driven the dividend stock to deliver 10-year annualized returns of roughly 15.2%, which is superb for a utility and certainly better than market returns.
At writing, the stock is a good buy and offers a yield of close to 4.6%. It aims to increase its cash distribution by 5-9% per year.
National Bank of Canada stock
National Bank of Canada (TSX: NA) has delivered above-average returns over the last decade or so versus BMO Equal Weight Banks Index ETF, which provides exposure to the Big Six Canadian banks. Specifically, the dividend stock of the sixth-largest Canadian bank delivered annualized total returns of about 13.9% versus ZEB’s 10.1% in the period.
One reason is that the bank is more focused in Canada, earning approximately 80% of its revenue in Canada, particularly, 55% in Quebec. So, it has been more resilient in this global banking shakeup. As a smaller player versus its larger peers, National Bank may also have greater room for growth. Here’s a comparison of the year-to-date price action of the bank stock and ZEB.
NA and ZEB data by YCharts
TELUS stock
Other than the big Canadian banks, the big Canadian telecoms also operate as an oligopoly. The Big Three Canadian telecoms, including TELUS (TSX: T), are able to generate stable cash flows through economic cycles.
TELUS stock makes a nice fit for beginner investors looking for a blue-chip stock to help stabilize their portfolios. Like the other two stocks discussed so far, TELUS is a consistent dividend payer. In fact, it has increased its dividend for about 19 consecutive years with a five-year dividend-growth rate of 6.6%.
At writing, the Canadian stock offers a dividend yield of 5.1%. Through 2025, it intends to increase its dividend by 7-10% per year.
For a change of style, beginner investors should also have top-notch growth stocks on their radar, such as the following names.
Constellation Software stock
Constellation Software (TSX: CSU) is an exceptionally quality Canadian tech stock with a track record of successful execution. Its five-year return on equity is about 46.7%, which is absolutely superb!
As a result of the best of the best management team making great acquisitions at good prices, the tech stock’s 10-year total returns are about 35.9% per year! Approximating with the Rule of 72, the stock has essentially doubled its investors’ money every two years in this period.
Analysts believe the stock is fairly valued today. Each share costs about $2,574 at writing. This may be too big an investment for new investors who want to dabble in the idea. No worries, though; you can invest as little as you want on Wealthsimple by buying fractional shares.
Dollarama stock
Like Constellation Software, Dollarama (TSX: DOL) pays a tiny yield but has rewarded long-term investors massively. The growth stock has delivered total returns of roughly 23.4% per year in the last 10 years or so. In other words, it has roughly doubled investors’ money every three years or so!
Dollar stores like Dollarama are the go-to location for folks who are tightening the belt because of the high inflation we’ve been experiencing.
The growth stock’s dividend hike of 28% last month suggests it’s a healthy company with strong growth potential. In fact, it’s a Canadian Dividend Aristocrat with about 12 consecutive years of dividend growth. For reference, its 10-year dividend-growth rate is 11.9%.
