Buying and holding a few blue-chip stocks can stabilize your portfolio and diversify risk. These stocks represent well-established companies with large market caps, growing earnings bases, and strong financial footing. Thanks to their solid fundamentals, these Canadian stocks generate steady capital gains over the long term. Moreover, they return significant cash to their shareholders through dividends and share repurchases.
With this backdrop, let’s look at three blue-chip stocks that every Canadian should own.
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Blue-Chip Stock #1
Speaking of top blue-chip stocks, Loblaw (TSX: L), Canada’s leading food and pharmacy company, is a must-have in your portfolio for growth, income, and stability. Thanks to its defensive business model and ability to grow customer traffic in all market conditions, this retailer has been consistently increasing its revenues and earnings, Thanks to its solid financials, Loblaw stock has generated solid capital gains and outperformed the broader market averages with its returns.
For instance, Loblaw stock has grown at a CAGR of 24.8% in the last five years, delivering an impressive overall capital gain of 204.4%. Besides this notable capital gain, Loblaw has enhanced its shareholders’ value through share repurchases and dividend payments.
Loblaw is well-positioned to continue to drive its same-store sales and earnings, thanks to its growing number of discount stores, diverse product offerings, and expansion of private-label offerings. Its value pricing and optimization of its retail network will likely bolster its financials, enabling the company to return more cash to its shareholders.
Blue-chip stock #2
Enbridge (TSX: ENB) stock could be another top blue-chip stock to consider now. This energy infrastructure company owns and operates an extensive liquids pipeline network. Further, its utility business generates predictable cash flows. The company also owns a growing portfolio of renewable energy assets, which position it well to capitalize on energy transition opportunities.
The company’s infrastructure assets serve top energy demand and supply markets. Thus, its assets witness a high system utilization rate, which supports its distributable cash flows (DCF) and earnings growth. Enbridge has regularly paid dividends for seven decades thanks to its resilient cash flows. Further, it raised its dividends for 30 consecutive years and offers an attractive yield of about 6.1%.
Enbridge’s high-quality, low-risk asset base, long-term contracts, regulated tolling frameworks, and higher utilization rate will continue to drive reliable growth. Further, its investments in utility-like projects and renewable energy assets bode well for future growth. Additionally, its strategic acquisitions and multi-billion-dollar capital projects are likely to fuel revenue growth and enhance cash flow, driving its dividends and share price.
Blue-chip stock #3
Investors could also consider Canadian National Railway (TSX: CNR) for stability, regular dividend income, and decent capital gains. This blue-chip company operates an extensive rail network connecting key markets across North America. Since it plays a crucial role in Canada’s supply chain, the transportation company’s services are deemed essential for the economy, which adds stability to its operations in all market conditions.
Besides stability, Canadian National Railway has delivered 28 years of consistent dividend growth. Its payouts reflect its ability to consistently grow its earnings. Moreover, its dividend per share has grown at a CAGR of 15% since the company first paid its dividend in 1996. Also, it has repurchased nearly $35 billion in shares since 2000.
Canadian National Railway’s resilient business model, exposure to diversified sectors, and focus on expanding its rail network through acquisitions and capital investments position it well to continue to deliver steady growth in the coming years. Further, the company’s solid balance sheet positions it well to capitalize on growth opportunities. In addition, its efforts to improve operational efficiency will likely drive its earnings and dividend payouts.
