Investing in equities remains one of the most effective strategies for creating wealth over time. However, investors should focus on fundamentally strong companies with solid growth prospects while investing in stocks. These firms are better positioned to deliver above-average returns, especially in the long run.
Against this background, here are my two favourite TSX stocks poised to outperform the broader markets and build lasting wealth.
Dollarama
Dollarama (TSX:DOL) is one of my favourite stocks for creating long-term wealth. The discount retailer offers an attractive combination of growth, dividend income, and stability. Notably, Dollarama provides a wide range of consumer products and sells them at low and fixed-price points. This value proposition enables the retailer to attract customers regardless of the economic situation.
The Canadian retailer’s defensive business model and growing transaction volumes and customer base enable it to grow its financials at a healthy pace, enhance shareholders’ value through higher payouts, and support its share price.
For instance, Dollarama stock is up over 56% in one year, handily surpassing the Canadian benchmark index with its returns. Further, its share price has gained about 230% in five years, reflecting a solid average annualized growth rate (CAGR) of 26.9%. Besides stellar capital gains, Dollarama regularly rewards its shareholders with higher dividend payments. Since 2011, Dollarama has raised its dividend 13 times, which is impressive.
Looking ahead, Dollarama is well-positioned to sustain its growth trajectory. Its value pricing strategy and expanding store footprint are expected to drive customer traffic and boost revenue, even during economic downturns. The company’s focus on efficient sourcing and productivity enhancements will likely support margin expansion and higher earnings. This financial strength will enable Dollarama to continue increasing its dividends and delivering strong shareholder returns.
Shopify
Shopify (TSX:SHOP) is another top-quality TSX stock to consider now, thanks to its dominance as a leading omnichannel commerce solutions provider. The company’s omnichannel platform serves small and mid-sized businesses, making it one of the key beneficiaries of the ongoing shift toward digital commerce. Further, with the holiday season approaching, Shopify is poised to capitalize on increased consumer spending, which should drive its gross merchandise volume (GMV) and revenue growth.
Shopify’s focus on product innovation and expansion of marketing and selling platforms are expected to accelerate its growth rate. Offerings such as Shopify Payments and Shopify Capital and the higher adoption of its unified commerce solutions are likely to drive its merchant base, GMV, and gross payment volume (GPV). In addition, Shopify’s point-of-sale (POS) solution continues to gain traction. It will benefit from the expansion of its payment solutions in the international markets and increased activity in offline and business-to-business (B2B) channels.
In addition to expanding its product suite, Shopify is leveraging artificial intelligence (AI) to optimize its platform, lower costs, and improve customer experiences. Moreover, the tech company’s shift toward an asset-light business model and focus on cost reduction further bolsters its financial health. These initiatives position Shopify to deliver sustainable earnings growth and consistent share price appreciation in the long term.
