Blue-chip stocks in Canada, known for their stability, strong financials, and consistent dividend payouts, have been a cornerstone for many conservative investors. Over the past 20 years, Canadian blue-chip stocks have delivered an average annual total return of approximately 7-8%.
These stocks are known for their ability to weather economic downturns and provide reliable dividends. Plus, they often yield around 3-5% annually. Blue-chip stocks are particularly attractive for long-term investors seeking steady growth and income, with lower risk compared to more volatile sectors. So, let’s look at a few to build up your portfolio.
Royal Bank
Using Royal Bank of Canada (TSX:RY) stock as a blue-chip building block lays down a solid foundation for long-term financial growth. RBC, with a market cap of $210.51 billion, is a giant in the Canadian banking industry. This makes it a reliable cornerstone for any investment strategy. Yet its trailing price-to-earnings (P/E) ratio of 13.62 and forward P/E of 11.83 suggest that it’s trading at a reasonable valuation.
Recent earnings reports have been positive for RBC. It demonstrated quarterly revenue growth of 11.70% year over year and a net income of $15.33 billion over the last year. This solid performance reflects the bank’s strong management and ability to navigate economic challenges. This ensures your investment in RBC is both stable and growing. Plus, with a beta of 0.85, RBC is less volatile than the broader market. This offers a smoother ride as you build your wealth over time.
One of the best aspects of holding RBC stock is the dividend. With a forward annual dividend yield of 3.82% and a payout ratio of just 50%, RBC offers a reliable income stream that’s well-supported by its earnings. Over the year, the stock has seen a nearly 20% increase. Plus, with a five-year average dividend yield of 3.92%, RBC has a history of rewarding its shareholders. This makes it a perfect fit, helping you reach your financial goals faster.
CNR
Using Canadian National Railway (TSX:CNR) stock as a blue-chip building block is another strong move. As one of the largest and most efficient railway networks in North America, CNR is a powerhouse in the transportation sector.
Recent earnings reports highlight CNR’s strong financial performance. Despite the challenges faced by the transportation sector, CNR has managed to deliver solid results, with revenue growth and healthy profitability. The company’s operating ratio continues to be one of the best in the business. This showcases its ability to control costs while maximizing earnings. This efficiency, combined with a robust revenue stream, means that CNR is well-positioned to weather economic fluctuations, ensuring your investment remains on track.
One of the standout benefits of holding CNR stock is the dividend. CNR has a strong history of dividend growth, offering a yield that, while modest, is consistently growing. CNR’s blue-chip status, combined with its strategic importance in North American trade, makes it a foundational stock that can provide both income and capital appreciation, helping you build a secure and prosperous financial future.
Hydro One
Finally, Hydro One (TSX:H) is a powerhouse in more ways than one. As Ontario’s largest electricity transmission and distribution provider, Hydro One plays a critical role in keeping the lights on across the province. And this translates to a stable and predictable revenue stream.
Recent earnings reports have been solid, reflecting Hydro One’s consistent operational performance. The company shows strong quarterly revenue growth, driven by its regulated and essential service operations. This stability is further underscored by its regulated rate base. This ensures a predictable cash flow, even in uncertain economic times. Hydro One’s ability to generate consistent earnings makes it an attractive option for investors looking to build wealth over time without taking on excessive risk.
One of the key benefits of holding Hydro One stock in your Tax-Free Savings Account is its attractive dividend. With a healthy yield that’s typically around 4%, Hydro One provides a steady income stream that can grow over time. The company’s strong focus on efficiency and cost management supports its ability to maintain and even increase its dividend payouts. Hydro One’s combination of stability, reliable earnings, and a growing dividend makes it a solid choice for building a secure and prosperous financial future.
