Investing in fundamentally strong stocks and holding onto them can help you secure a wealthy future. However, when investing for the future, investors could consider investing in businesses with solid growth prospects and the ability to deliver profitable growth. Such stocks have the potential to appreciate substantially over time and may also enhance returns through dividend payments. Against this background, here are three Canadian stocks to buy to generate above-average returns.
Celestica stock
Celestica (TSX:CLS) presents a compelling long-term opportunity for wealth creation as it is set to capitalize on the fast-growing artificial intelligence (AI) sector. As a provider of supply chain solutions and electronic manufacturing services, Celestica is positioned to benefit from increased investments in AI infrastructure, particularly in data center hardware such as servers, networking equipment, and storage.
The company’s hardware platform solutions division is already witnessing massive growth, driven by high demand within its Ethernet switch business. Further, with rising expenditures on data center hardware, the momentum in this segment will likely be sustained, propelled by demand for its advanced networking switches, including 400G and 800G models.
Celestica’s server business will likely boost its overall financials, reflecting the demand for AI and machine learning (ML) capabilities that require high-performance computing platforms. Furthermore, Celestica’s capabilities in high-performance storage solutions for data centres further strengthen its prospects and will help the company capture growth within the thriving AI sector.
While Celestica will likely gain on the back of higher AI infrastructure spending, its diversified portfolio equips it well to deliver steady growth across all market conditions. The stock has already gained over 210% in one year. Moreover, it has further room for growth.
goeasy stock
goeasy (TSX:GSY) is a solid stock to create wealth in the long term. As an industry leader in Canada’s non-prime lending sector, the company benefits from a large subprime lending market that drives its top and bottom lines. This, in turn, supports its share price and dividend growth.
Over the past five years (as of June 30, 2024), goeasy’s revenue has grown at a compound annual growth rate (CAGR) of 20.2%. At the same time, its earnings have surged at a CAGR of over 28%. This solid financial performance has translated into an outstanding capital gain of about 238% for shareholders, alongside consistent dividend increases.
goeasy is well-positioned to maintain its momentum. The company’s growth strategy includes geographic expansion, a wide range of lending products, omnichannel offerings, and diverse funding sources. These factors, combined with solid underwriting capabilities and stable credit performance, are likely to support its earnings and share price in the future.
The company remains poised to deliver above-average returns as goeasy’s consumer loan portfolio will likely expand. In addition, it currently offers a solid dividend yield of 2.6%, making it a compelling investment seeking growth and income in the long term.
Dollarama stock
Dollarama (TSX:DOL) stock presents a compelling opportunity for long-term investors seeking a balanced mix of stability, income, and growth. Its unique low and fixed-price point model attracts a diverse customer base across all economic environments, enhancing its resilience in both strong and weak markets.
Over the past five years, Dollarama has delivered remarkable returns of 231%, which shows the strength of its business model and growth consistency. Alongside this impressive capital appreciation, Dollarama has steadily increased its dividend, offering shareholders a consistent income.
Dollarama is well-positioned to maintain its growth. The company’s focus on value pricing, an extensive and growing store network, and a wide product range will fortify its market position. Additionally, its growing online capabilities expand Dollarama’s reach, supporting revenue and market share growth.
Dollarama’s operational efficiency initiatives further strengthen its growth prospects. By enhancing productivity and cost management, the retailer is likely to deliver continued earnings growth, which will support future dividend increases and share prices.
