Canadian Blue-Chip Stocks: The Best of the Best for November 2023

Blue-chip TSX stocks such as Dollarama are positioned to deliver inflation-beating returns to shareholders in 2023 and beyond.

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In an uncertain and sluggish macro environment, it pays to invest in blue-chip stocks that are equipped with strong balance sheets, stable cash flows, and a growing dividend. Typically, blue-chip stocks may not generate game-changing wealth for shareholders, but they offer stability during periods of economic downturns.

Here are three top TSX blue-chip stocks you can consider buying in November 2023.

Dollarama stock

Valued at $27 billion by market cap, Dollarama (TSX:DOL) is a popular discount retailer in Canada. In the past decade, Dollarama stock has returned over 550% to shareholders, easily crushing the broader markets.

Despite a challenging economic backdrop, Dollarama increased sales by almost 20% to $1.46 billion in the fiscal second quarter (Q2) of 2024 (ended in July). Its comparable store sales increased by 15.5%, while EBITDA (earnings before interest, tax, depreciation, and amortization) surged 23.8% to $366.8 million in the quarter.

Dollarama opened 18 net new stores in Q2, an increase from the 13 stores it opened in the year-ago period. Despite its outsized gains, Dollarama stock trades at 28.5 times forward earnings, which is not too expensive given the company is forecast to increase the bottom line by 17.5% annually in the next five years.

Dollarama also pays shareholders an annual dividend of $0.284 per share, indicating a forward yield of less than 0.3%. However, these payouts have risen by 17% annually in the last 12 years.

Canadian Natural Resources stock

Among the largest companies on the TSX, Canadian Natural Resources (TSX:CNQ) has returned over 2,000% to shareholders in the last 20 years after adjusting for dividends. It currently pays an annual dividend of $3.60 per share, translating to a yield of 4%. Moreover, these payouts have risen by 23% annually in the last 23 years, showcasing the resiliency of CNQ’s business model and cash flows.

CNQ’s top-tier reserves and low-cost production provide it with competitive advantages in terms of capital efficiency and flexibility. It expects to increase production volumes in the second half of 2023, which should drive cash flows higher and support dividend growth. Once Canadian Natural Resources reaches $10 billion in net debt, it will return 100% of free cash flow to shareholders.

In Q2 of 2023, it reported net earnings of $1.3 billion and funds flow of $2.7 billion, allowing the company to return $4.3 billion to shareholders via dividends and buybacks.

GFL Environmental stock

The final TSX blue-chip stock on my list is GFL Environmental (TSX:GFL), which offers waste management services. GFL is part of a recession-resistant industry, and its portfolio of solutions includes solid & liquid waste management and soil remediation. It also provides collection, transportation, recycling, and disposal services for municipal, residential, commercial, and industrial customers.

In Q3 of 2023, GFL reported revenue of $1.89 billion, an increase of 10.3% year over year, after excluding the impact of divestitures. It ended Q3 with adjusted earnings before interest, tax, depreciation, and amortization of $530.3 million, indicating a healthy margin of 28.1%.

GFL’s robust profit margins allowed the company to end Q3 with a free cash flow of $276 million, which can be deployed to reinvest in growth, pursue acquisitions, or raise its quarterly dividends.

In the first nine months of 2023, GFL has completed acquisitions, which generate $325 million in annualized revenue.

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 Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool recommends Canadian Natural Resources. The Motley Fool has a disclosure policy.

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