Investors can build wealth, generate dividend income, and achieve long-term financial goals by consistently investing in quality stocks regardless of short-term volatility. With this backdrop, let’s look at a few fundamentally strong stocks with the potential to deliver above-average returns over time. Some of these Canadian stocks also offer reliable dividend payouts.
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Constellation Software
As technology companies often possess higher growth potential, it’s prudent to diversify your investment portfolio and add top-quality tech stocks. Among leading Canadian tech companies, investors could consider Constellation Software (TSX:CSU) stock. The company offers software and services to the public and private sectors and specializes in acquiring, managing, and creating industry-specific software businesses.
Thanks to its diversified portfolio and tailored solutions, Constellation Software remains well-positioned to capitalize on evolving demand trends.
Notably, Constellation Software stock has grown at a compound annual growth rate (CAGR) of 27.7% in the last five years, delivering a total return of over 240%. Its broad portfolio of software businesses, large customer base, and ability to acquire and integrate small and mid-sized vertical market software (VMS) companies position it well to generate strong financials in the upcoming years. This growth will support the uptrend in CSU stock and enable it to consistently deliver above-average returns.
goeasy
goeasy (TSX:GSY) is one of the top Canadian stocks to own right now. This subprime lender has been consistently generating double-digit sales and earnings growth rates. Moreover, its growing earnings base has enabled the company to return significant cash to its shareholders through higher dividend payments.
Thanks to these catalysts, goeasy stock has appreciated about 323% in five years, reflecting an above-average CAGR of more than 33%.
The company’s omnichannel offerings, growing geographical footprints, diversified funding base, and solid risk-management practices position it well to capitalize on the large subprime lending market. A growing consumer loans portfolio, steady credit performance, and operating efficiency will likely drive its future revenue and earnings, support higher dividend payments, and push its share price higher.
Dollarama
Investors could consider adding Dollarama (TSX:DOL) stock to their portfolio. This discount retailer operates a defensive business and consistently generates solid growth regardless of economic cycles. Dollarama also focuses on enhancing its shareholders’ value through higher dividend payments.
Thanks to these attributes, Dollarama has consistently outperformed the TSX with its returns and made its investors rich.
For instance, Dollarama stock has increased at a CAGR of 23.8% in the last five years, delivering capital gains of about 191%. Further, this discount store operator has uninterruptedly increased its dividend during the same period.
Dollarama’s value pricing strategy could continue to drive traffic and sales in the future. Moreover, product expansion, an extensive and growing store base, and a direct sourcing strategy will likely support the company’s financials and share price.
Bottom line
On average, Constellation Software, goeasy, and Dollarama stocks have grown at a CAGR of an impressive 28% in the past five years. Had you invested $10,000 in these stocks five years ago, your investment would now be valued at $34,359.
Looking forward, if these shares maintain an average annualized return of 20%, your initial $10,000 investment could potentially grow to $61,917 in the next 10 years.
