After a challenging 2022, the Canadian equity markets have bounced back strongly, with the S&P/TSX Composite Index rising 6.4% this year. However, higher interest rates, inflation, and the fallout from the banking crisis are causes for concern. Some economists are even predicting a mild recession in the second half of this year. So, given the uncertain outlook, investors can strengthen their portfolio through the following three top Canadian stocks.
Dollarama (TSX:DOL) is a Canadian value retailer that operates 1,486 stores across Canada and also owns a 50.1% stake in Dollarcity, which operates 440 stores in four countries across Latin America. The rising prices have created a deeper hole in customers’ pockets. However, since the company offers essential products at attractive prices, I expect the value retailer to continue witnessing healthy footfalls irrespective of the economic outlook.
Over the last 10 years, Dollarama has added new stores at an average of 70 per year. Management hopes to continue its expansion and projects to reach 2,000 stores by the end of 2030. In addition to expanding its flagship brand, the company expects to increase its Dollarcity store count to 850 by the end of 2029. Along with its expansion initiatives, the dollar-store leader is focused on efficient capital utilization and improvements in direct sourcing, which could continue to drive its financials in the coming years.
Besides, the company has returned more than $6 billion to its shareholders over the last 10 years through share repurchases and quarterly dividends. So, considering its solid underlying business and healthy growth prospects, I am bullish on Dollarama despite the volatile outlook.
BCE (TSX:BCE) would be another excellent stock to have in your portfolio in a choppy environment. The telecommunications sector has become an essential service due to digitization. Amid growing demand, the telco is working on strengthening its 5G and broadband assets. The company’s 5G service covered 82% of the Canadian population by the end of last year. Meanwhile, management expects to expand its service to 85% by the end of this year.
Moving to the broadband segment, BCE also expects to complete 85% of its planned buildout program by the end of this year. Amid these expansions, the company expects to have around 10 million total connections. Additionally, a substantial percentage of its revenue is from recurring sources, thus providing stability to its financials.
With most of the infrastructure in place, BCE plans to lower its capital expenditure from $5.1 billion in 2022 to $4.8 billion. Given its growth prospects and lower capital expenditure, cash flows could improve, thus allowing the company to pay dividends at a healthier rate. BCE has raised its quarterly dividends uninterruptedly for the last 15 years, and its dividend yield currently stands at 6.05%.
Waste Connections (TSX:WCN) is a waste management company operating primarily in exclusive and secondary or rural markets. The company has been expanding its business through strategic acquisitions. It has acquired around US$13.5 billion of assets since 2010. Despite its aggressive acquisitions, WCN enjoys a healthy EBITDA (earnings before interest, tax, depreciation, and amortization) margin of around 30%. Supported by these strong financials, WCN stock has delivered a total shareholders’ return of over 5,800% since going public in 1998.
Meanwhile, given its solid underlying business and healthy growth prospects, I expect the uptrend in WCN’s financials to continue. Bolstered by favourable pricing and contributions from acquisitions, WCN’s management expects its revenue to grow by 11.6% this year. Supported by its topline growth, adjusted EBITDA could reach US$2.5 billion, representing 12.6% growth from the previous year. Its EBITDA margin could also expand by 30 basis points to 31.1%. So, considering its solid track record and healthy growth prospects, I believe WCN would be an excellent addition to your portfolio.