Canadian equity markets were under pressure last month, with the S&P/TSX Composite Index falling 1.8%. The United States Federal Reserve’s delay in slashing interest rates appears to have made investors nervous, leading to weakness in the equity market. Despite the uncertainty, you can buy the following three TSX stocks without hesitation due to their solid underlying businesses and healthy cash flows.
Dollarama
Dollarama (TSX:DOL) has adopted the direct sourcing method, boosting its bargaining power and lowering intermediatory expenses. Besides, its efficient logistics have reduced its costs, thus allowing it to offer various consumer products at attractive prices. So, the Canadian retailer has been witnessing healthy same-store sales irrespective of the macro environment.
It has also expanded its footprint by increasing its store count from 651 in fiscal 2011 to 1,569 by the end of the first quarter of fiscal 2025. Meanwhile, the company’s management hopes to raise its store count to 2,000 units by the end of fiscal 2031. Given its capital-efficient model, quick sales ramp-up, and lower average payback period, these expansions could boost the company’s financials in the coming years.
Further, Dollarama raised its stake in Dollarcity from 50.1% to 60.1%. Meanwhile, Dollarcity is looking at expanding its store count and expects to add around 500 stores over the next six years to increase its count to 1,050 stores by the end of fiscal 2031. These growth initiatives could boost Dollarcity’s contribution towards Dollarama. Considering all these factors, I believe Dollarama is an ideal buy, irrespective of the economic outlook.
Waste Connections
Waste Connections (TSX:WCN) is another excellent defensive stock to have in your portfolio due to the essential nature of its business. The waste management company collects, transfers, and disposes of non-hazardous solid waste in secondary and exclusive markets across the United States and Canada. The company has been expanding its footprint through organic growth and strategic acquisitions. Since 2016, it has outlaid around 50% of its capital on acquisitions.
Given its robust cash flows and solid financial position, WCN’s management expects to continue with its acquisitions and has considered this year its busiest ever. Further, the company is developing several renewable gas facilities, with the management expecting to put three of them into operation this year. Despite the industry-wide delay in installations, it hopes to generate incremental annual EBITDA (earnings before interest, tax, depreciation, and amortization) of $200 million from the beginning of 2026.
Supported by its healthy cash flows, WCN’s management expects to return a higher percentage of its capital outlays to its shareholders through share repurchases and dividends. Considering all these factors, I believe WCN would be a worthwhile buy.
Fortis
Fortis (TSX:FTS) is another stock you could buy without hesitation due to its regulated asset base and low-risk utility business. It has delivered an average total shareholders return of 10.1% for the last 20 years, outperforming the broader equity markets. Supported by its healthy cash flows, the company has raised its dividends for 50 consecutive years, with its forward yield currently at 4.44%.
Further, the electric and natural gas utility company plans to invest approximately $25 billion from 2024 to 2028, with $7 billion on clean energy. It expects to generate around 66% of the required capital from its operations and secondary offering while the remaining 34% from debt. So, these growth initiatives won’t substantially increase its leverage. Meanwhile, these investments could increase its rate base at an annualized rate of 6.3%. The rate base growth, increasing tariff rate, and improving operating efficiency could continue to drive its financials, thus allowing the company to continue its dividend growth. Meanwhile, Fortis’s management expects to raise its dividends by 4 to 6% annually through 2028, making it an excellent buy irrespective of broader market conditions.
