Canadian Blue-Chip Stocks: The Best of the Best for Cautious Investors

Even though a stock’s status as an established, blue-chip business is assurance enough for most cautious investors, it pays to identify and pick the best of the bunch.

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While it’s true that every investor should have an adequate amount of risk tolerance, it’s possible to be both cautious and profitable. Most conservative investors naturally flock towards blue-chip stocks that tend to be more stable and predictable compared to the rest of the market and usually have years, even decades, of performance data to draw insights from.

But the cautious ones among these conservative stocks tend to be even more selective and long for the best among the blue-chips.

The railway giant

The importance of railways has diminished a bit from what it was a few decades ago, when railways were literally “veins” of civilizations that connected different parts of the country with one another, but it’s unlikely to ever be fully gone.

Railway companies like Canadian National Railway (TSX:CNR) still play a key role in the local and international supply chain and are responsible for transporting massive quantities of important commodities and items with a smaller footprint than trucks. The company’s railway line also has strategic strengths, as it combines three major North American ports.

As an investment, it offers a decent combination of capital-appreciation potential and dividends, leaning more towards the former. The stock rose up 41% in the last five years alone. As for the dividends, it’s offering a yield of about 1.9% right now and has a stellar history as a Dividend Aristocrat — 27 consecutive years of dividend growth.

A utility company

Fortis (TSX:FTS) is arguably the poster boy for a safe blue chip in Canada, and even though its returns lean more towards dividends than capital-appreciation potential (especially in the last five years), it’s one of the best long-term holdings for cautious investors.

The stock is also discounted right now (modestly) and is offering payouts at a yield of about 4.2%. The valuation is quite decent as well and another reason to consider this stock.

The growth of Fortis has slowed down in recent years, but its price has appreciated by about 70% in the last decade. A similar growth pace in the upcoming decades can lead to decent overall returns (along with the dividends).

Its dividends are among the safest in Canada, as the company has grown its payouts for 49 consecutive years. The utility business model (with 99% of its assets falling in the regulated category) further solidifies its status as a “safe” and rewarding blue chip.

A bank

Royal Bank of Canada (TSX:RY) is the largest Canadian bank by market capitalization and the second-best grower in the Big Six, which is quite impressive considering its size. It has an impressive national and international presence, with a hefty segment of its revenue coming from outside the U.S.

The bank stocks in Canada are generally considered safe investments, especially when it comes to their dividends and Royal Bank of Canada is no exception. It has a rock-solid dividend history and its financial stability further strengthens the dividend sustainability potential.

In its last quarterly results, the bank experienced year-over-year growth in multiple categories, including net income and diluted earnings per share.

Foolish takeaway

Two of the three stocks are leaders in their respective sectors, and Fortis is among the most stable utility companies in Canada, with a decent international reach. They have safe business models, stellar dividend histories, and healthy finances, making them ideal picks for cautious investors.

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 Canadian National Railway and Fortis. The Motley Fool has a disclosure policy.

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