Investors seeking relatively steady returns in the long term could consider investing in Canadian blue-chip stocks. These are shares of companies with well-established businesses and strong fundamentals. As these companies consistently generate strong earnings, they enhance shareholders’ returns through regular dividend payments and share buybacks.
With this background, let’s zoom in on three blue-chip stocks that, in my view, every Canadian should own.
Canadian Natural Resources
With a market cap of around $111 billion, Canadian Natural Resources (TSX:CNQ) is a compelling Canadian stock for long-term investors. Shares of this leading oil and natural gas producer have risen about 276% in five years. This reflects an average annualized growth rate or CAGR of more than 30%, much higher than the broader market average.
While the company has comfortably outperformed the broader markets, it has enhanced its shareholders’ returns through higher dividend payments. Canadian Natural Resources has raised its dividend for 24 consecutive years. Further, its dividend grew at an impressive CAGR of 21% during the same period.
The oil and gas company’s highly diversified cash flows, high-value reserves, and long-life assets position it well to generate strong financials regardless of the commodity cycle. Further, its low maintenance capital requirement and focus on lowering operating costs augur well for long-term profitability. Additionally, its solid balance sheet equips it to pursue expansion opportunities, deliver strong growth, and return higher cash to its shareholders.
Alimentation Couche-Tard
Shares of the convenience store operator Alimentation Couche-Tard (TSX:ATD) could be a solid addition for investors looking for blue-chip stocks offering stability, high growth, and income. This retailer has been growing its revenue and earnings at a solid pace for years. For instance, Alimentation Couche-Tard’s top and bottom lines have grown at a CAGR of 7.3% and 18.8%, respectively, in the past decade.
Thanks to its strong financials, ATD has gained more than 449% in the last 10 years. During the same period, it increased its dividend at a CAGR of 26.6%.
Looking ahead, this large-cap company is likely to benefit from its extensive store base. Further, Alimentation Couche-Tard’s expansion of private label brands, value pricing strategy, and focus on improving operational efficiencies will likely drive its revenue and profitability in the long term. Also, the convenience store operator will likely benefit from its strategic acquisitions, which will expand its footprint, drive traffic, and support its financials and share price.
Constellation Software
Investors could consider investing in shares of Constellation Software (TSX:CSU), which provides software and services to the public and private sectors. It acquires, manages, and builds industry-specific software businesses that provide specialized solutions.
Thanks to its broad portfolio of software businesses, focus on strategic acquisitions, and a large customer base spread across 100 countries, Constellation Software delivers strong financials, which support its share price and enable the company to return cash to its shareholders.
Notably, Constellation Software stock has risen about 269% in five years. The company’s focus on small and mid-sized vertical market software (VMS) acquisitions will likely drive its financials in the coming years and support the uptrend in its share price. The company is also building a new team to pursue large VMS acquisitions, which augurs well for long-term growth.
