The S&P/TSX Composite Index has demonstrated remarkable resilience despite ongoing macroeconomic and geopolitical uncertainties. Looking ahead, several factors, including potential interest rate reductions, increased consumer discretionary spending, cost-cutting initiatives, the integration of artificial intelligence (AI) technology, and enhanced supply-chain efficiencies, are expected to bolster corporate earnings and drive Canadian stocks higher.
Against this backdrop, here are my top three Canadian stocks to buy right now. These stocks are backed by fundamentally strong businesses and will likely deliver above-average returns in the long term.
Constellation Software
Investors seeking above-average returns should consider adding a few high-quality Canadian tech stocks to their portfolios. Within this sector, Constellation Software (TSX: CSU) is one of the top performers, consistently delivering strong growth and outperforming the broader market.
Over the past year, Constellation Software stock has surged by approximately 51%. Moreover, it has increased at a compound annual growth rate (CAGR) of 28.8% in the last five years. This translates into a remarkable overall gain of about 256% during this period.
The company’s extensive portfolio of software businesses and a large, steadily expanding customer base continue to drive its financials. Additionally, Constellation Software’s focus on custom solutions and strategic acquisitions positions it well to capitalize on emerging tech trends, enabling it to deliver strong financial results in the coming years and support its share price.
goeasy
goeasy (TSX:GSY) stock is a must-have for investors seeking value, income, and growth. This Canadian subprime lender has consistently delivered impressive financial results, with its revenue and earnings growing at a high double-digit pace. Thanks to its rapid earnings growth and leadership in the subprime lending market, goeasy stock has gained substantially in value over the past decade, outperforming the TSX market by a considerable margin.
For instance, goeasy stock has grown at a CAGR of over 26% in the last 10 years, delivering capital gains of 948%. During this period, it has uninterruptedly raised its dividends at a healthy pace.
Goeasy is well-positioned to capitalize on the significant opportunities within the large subprime lending market. The company’s wide range of financial products, ongoing geographical expansion, and diversified funding sources will likely drive its sales. Further, goeasy’s solid credit underwriting capabilities are expected to support stable credit and payment performance, while its operational efficiency should drive earnings growth at a pace faster than sales.
In summary, goeasy is poised to deliver substantial capital gains and attractive dividends to its investors. Despite its impressive track record, the stock remains attractively priced with a price-to-earnings (P/E) multiple of 10.9, which is low considering its high earnings growth. Moreover, with a dividend yield of 2.4%, goeasy offers a compelling mix of value, income, and growth potential.
Dollarama
Shares of Canadian value retailer Dollarama (TSX:DOL) could be a solid buy near the current market price. The company’s defensive business model, ability to consistently grow its sales and earnings in all market conditions, and commitment to reward its shareholders with higher dividend payments make it a compelling investment.
This discount retailer sells various everyday products at low, fixed price points. Thanks to its value pricing strategy, Dollarama attracts shoppers regardless of market conditions, driving its sales, earnings, and dividend payouts.
Thanks to its solid financial performance, Dollarama stock has surged by approximately 48% over the past year. Looking at a longer timeframe, the stock has achieved an impressive CAGR of about 24% over the last 10 years, resulting in a capital gain of over 767%. Beyond capital appreciation, Dollarama has consistently rewarded its shareholders, increasing its dividend 13 times since 2011.
Dollarama’s competitive pricing and strong presence across all Canadian provinces will likely drive its top line. Furthermore, the company’s direct sourcing and focus on driving efficiency are expected to bolster its earnings. Overall, Dollarama is well-positioned to continue delivering solid capital gains and dividend growth.
