Invest for Tomorrow: 3 TSX Stocks to Build Lasting Wealth

Stocks can be fun but risky. So, if you want to create long-term wealth, consider these top choices.

Amy Legate-Wolfe

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote: “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published December 1, 2024 9:00 am EST

Building lasting wealth through investing is like crafting a masterpiece. It requires thoughtful planning, high-quality components, and a long-term perspective. While trends may shift and markets may fluctuate, investing in fundamentally strong companies offers stability and growth. Canadian National Railway (TSX:CNR), Bank of Montreal (TSX:BMO), and Waste Connections (TSX:WCN) shine as dependable options for those looking to secure their financial future.

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CNR stock

CNR stock is a cornerstone of North America’s transportation network. With an expansive reach spanning Canada and the United States, CNR facilitates the efficient flow of goods across diverse sectors. This geographical and operational scale is a significant competitive advantage.

In its most recent quarter, CNR reported revenue of $17.16 billion, showing a year-over-year growth of 3.1%, even in a challenging economic environment. Its operating margin of 39.63% highlights its operational efficiency, a testament to its effective cost management. CNR’s forward price-to-earnings (P/E) ratio of 18.76 reflects the market’s confidence in its future growth. Add to this its reliable dividend payout of 2.17%, and you have a stock that appeals to both growth and income-oriented investors.

BMO stock

Next, BMO stock is a giant in Canada’s financial landscape, offering a range of services including personal banking, wealth management, and investment solutions. Established in 1817, BMO has weathered economic cycles with resilience and adaptability.

In its most recent quarter, the bank posted a net income of $6.3 billion, reflecting its ability to generate robust profits. Its profit margin of 21.2% and a solid return on equity of 8.49% underscore its operational strength. With a forward P/E ratio of 12.22, BMO is attractively valued, especially considering its dividend yield of 4.67%. For investors seeking consistent income alongside capital appreciation, BMO’s strong track record and strategic positioning make it a reliable choice.

Waste Connections

WCN stock operates in a less glamorous but undeniably essential sector: waste management. Its business model thrives on the necessity of its services, making it resilient in both good and bad economic times.

In its latest financial results, WCN reported revenue of $8.69 billion, a 13.3% increase from the prior year, underscoring its growth trajectory. The TSX stock boasts an operating margin of 20.76% and a return on equity of 11.85%, reflecting its efficient use of resources.

While its dividend yield of 0.66% is modest, WCN’s forward P/E ratio of 25 signals strong growth potential. For investors focused on long-term stability, WCN’s essential services and consistent performance are compelling reasons to consider this stock.

Working together

What makes these three companies particularly attractive is their ability to perform well across various economic conditions. CNR benefits from steady demand for freight transport, irrespective of market cycles, as industries depend on its network to move goods. BMO, as a major financial institution, combines stability with opportunities for growth — particularly as it continues to expand its presence in North America. Meanwhile, WCN offers a rare combination of growth and defensiveness, driven by the ever-present need for waste management services.

Furthermore, each company’s financial metrics tell a story of resilience and adaptability. CNR’s substantial operating cash flow of $7.12 billion and low debt relative to its cash flow provide flexibility for future investments. BMO’s commitment to maintaining a high dividend payout ratio of 69.51% ensures that investors are consistently rewarded. WCN’s robust free cash flow of $960.9 million signals its ability to fund expansion and shareholder returns even during uncertain times.

Bottom line

Investing in these TSX stocks can help you build a portfolio designed to weather market volatility while providing steady growth. By focusing on companies with strong fundamentals, proven track records, and forward-looking strategies, you can plant the seeds of financial success and watch them grow into lasting wealth over time. With patience and a commitment to sound investment principles, the financial garden you nurture today can yield an abundant harvest for years to come.