Canadian Blue-Chip Stocks: The Best of the Best for February 2024

Even though blue-chip has become a category of its own, there is a lot of diversity and variation among the blue chips, and each has its strengths and weaknesses.

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If you prioritize safety and predictability in your stock picks, blue-chip stocks can be no-brainers. However, not all blue-chip stocks are equally attractive, and their appeal may be enhanced or dampened by different market conditions and opportunities. If you are looking for blue chips standing out from the rest right now, three stocks should be on your radar.

A tech stock

Unlike the U.S., where tech stocks dominate the stock market, there is a distinct shortage of blue chips in the Canadian tech sector. From a handful that exists, Constellation Software (TSX:CSU) is by far the best pick right now.

This $76.9 billion market-cap company has a portfolio of six tech companies that, in turn, own dozens of tech businesses around the globe. Constellation Software acquires and manages software businesses that cater to specific industry verticals.

Constellation is one of the most consistent growers on the TSX and has grown enormously since its inception. The growth pace has slowed down a bit, but it’s still marketing-leading. The stock has risen by about 269% in the last five years.

Even though its books are healthy, this level of growth has made the stock quite expensive and overvalued, but it hasn’t been a hindrance to this stock’s growth yet.

A bank stock

Canadian bank stocks are among the “heaviest” securities in the stock market, with three out of the Big Six banks in Canada among the 10 largest Canadian companies by market cap.

They are also some of the oldest publicly traded institutions and dividend payers in the country. Royal Bank of Canada (TSX:RY) is the leader of this group and is currently the largest publicly traded company in the country by market cap.

Like most other blue chips in Canada, the Royal Bank is a great pick regardless of the market conditions, especially if you hold on to it long term. It offers a powerful combination of growth potential and dividends and has been growing its payouts for well over a decade, earning the title of an Aristocrat.

The current yield is 4.2%. However, you may want to wait till later in the month to buy because the stock is on a downward trajectory, and if you can buy it at a heavier discount, you would lock in a much better yield.

A telecom stock

Telus (TSX:T) is one of the three largest telecom companies in Canada, all three of which can be considered blue chips. The three dominate the local market, and all three can be considered decent 5G stocks.

But the reason Telus stands out from this group is its diversified growth avenue. In addition to the conventional lines of business for a telecom business (wireless, internet, etc.), the company is also emerging as a leader in smart home security and telehealth.

The home security line of products and services positions it for growth in the upcoming Internet of Things (IoT) uprising, and telehealth is a growing field. The company also has a solid IT subsidiary focusing heavily on artificial intelligence (AI).

It’s also one of Canada’s most heavily discounted blue chips right now, trading at a 31% discount from its 2021 peak, pushing its yield to a juicy number of 6.4%.

  • We just revealed five stocks as “best buys” this month … join Stock Advisor Canada to find out if Telus made the list!

Foolish takeaway

All three blue-chip stocks offer you a different combination of growth potential and dividends. Constellation leans heavily toward growth, while Royal Bank of Canada offers a more balanced combination of both. Telus used to offer both as well, but for now, it’s a better pick for dividends than growth.

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 recommends Constellation Software and TELUS. The Motley Fool has a disclosure policy.

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