Investors eying steady returns over the long term and adding stability to their portfolios could consider investing in blue-chip stocks listed on the TSX. These Canadian stocks represent companies with solid fundamentals and well-established businesses. In addition to capital gains, these shares offer steady dividend income, as these companies are profitable and have a growing earnings base. This enables them to reward shareholders with high dividends and share repurchases.
Although blue-chip stocks provide stability, dividend income, and consistent capital gains, it’s important to recognize that they are not without risks.
Against this background, let’s look at three blue-chip stocks every Canadian should own for steady capital gains and dividend income.
Canadian National Railway
Investors seeking stability, income, and growth could consider adding shares of Canadian National Railway (TSX:CNR) to their portfolio. This transportation powerhouse owns and operates an extensive rail network, providing critical shipping services across North America. As an essential service provider, Canadian National Railway’s operating and financial performance remains resilient, offering an extra layer of stability to its overall performance.
Canadian National Railway isn’t just a defensive play. Over the past decade, the stock has grown at a compound annual growth rate (CAGR) of over 11%, resulting in capital gains of over 185%. This is complemented by the company’s commitment to enhancing shareholder value. Since its listing in 1995, Canadian National Railway has increased its dividend at a CAGR of approximately 15%, showcasing a robust track record of rewarding its investors.
In summary, Canadian National Railway’s low-risk and defensive business model and well-diversified portfolio position it to thrive in all market conditions. Further, its focus on operational efficiency and strong balance sheet offers financial flexibility to pursue growth opportunities. It is poised to deliver steady capital gains and enhance its shareholders’ returns through dividend payments.
Loblaw
Loblaw (TSX:L), Canada’s largest food and pharmacy retailer, is an excellent investment for investors seeking top-tier, blue-chip stocks. Thanks to its recession-resilient business model, Loblaw consistently generates steady earnings and free cash flows in all market conditions, making it a reliable long-term investment.
Despite operating a low-risk business, this Canadian retailer has delivered notable capital gains over the past several years and outperformed the broader market averages. For example, Loblaw stock has delivered an impressive capital gain of over 385%, reflecting a CAGR of more than 17%. Further, Loblaw enhances its shareholder value via dividend increases and share repurchases.
Looking ahead, Loblaw’s discount stores and wide product offerings are likely to drive its foot traffic and drive same-store sales growth. Moreover, its strategic price freezes could continue to attract shoppers, thus boosting sales. In addition, the growing mix of private-label food products and its efforts to optimize its retail network augur well for profit margins and will support its stock.
Royal Bank of Canada
As the leading Canadian bank, Royal Bank of Canada (TSX:RY) is a dependable stock for its durable earnings growth and commitment to rewarding its shareholders with higher dividend payments. The bank’s highly diversified client base, disciplined cost management, and sustained earnings growth drive its stock and dividend payouts.
Royal Bank of Canada’s stock has gained over 187% in the past decade, reflecting a healthy CAGR of 11.1%. Moreover, its earnings and dividend increased at a CAGR of 7% and 8%, respectively, in the last 10 years.
The bank’s growing loan portfolio, solid deposits, improving efficiency ratio, and robust balance sheet suggest that it is well-positioned to grow its earnings. This will drive its shares and dividend payments.
