Build Enduring Wealth With These Canadian Blue-Chip Stocks

Blue-chip stocks are some of the best choices for creating the perfect portfolio.

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 January 27, 2025 3:45 pm EST

| More on: CNRFTSRY

Blue-chip stocks are often the cornerstone of a well-rounded investment portfolio, especially for Canadians. These companies have demonstrated stability, strong financial performance, and consistent dividend payouts, making them ideal for investors seeking long-term growth and income. At the top of the list are blue-chip stocks like Royal Bank of Canada (TSX:RY), Fortis (TSX:FTS), and Canadian National Railway (TSX:CNR).

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The stocks

Royal Bank stock, one of the largest banks in Canada, continues to impress investors with its solid earnings. In its latest quarter, RBC reported revenue of $56.51 billion, representing a year-over-year growth of 13%. Its profit margin remains strong at 28.67%, and the bank has consistently increased its dividend over the years, now offering a yield of approximately 3.2%. With a forward price-to-earnings (P/E) of 13.46, RBC remains attractively valued for a blue-chip stock with a strong track record of navigating economic headwinds.

Fortis, a leading utility provider, is another top pick for risk-averse investors. Fortis reported annual revenue of $11.44 billion as of its most recent quarter, with a profit margin of 14.49%. What makes Fortis particularly appealing is its stable business model in the utility sector, coupled with a solid dividend yield of 4.06%. Fortis has a remarkable history of increasing its dividend for 50 consecutive years, highlighting its commitment to shareholders.

Canadian National Railway, a titan in the industrial sector, continues to benefit from its essential role in North American trade. In its most recent earnings report, CNR posted revenue of $17.16 billion, with a quarterly revenue growth of 3.1%. Its operating margin of nearly 40% underscores its efficiency and profitability. With a current dividend yield of 2.25% and a payout ratio of just 39.35%, CNR is well-positioned to continue rewarding shareholders while maintaining its growth trajectory.

Why these work

What makes blue-chip stocks like these stand out is their resilience during economic downturns. Blue-chip stocks are often market leaders in the respective sectors, with strong balance sheets and diversified revenue streams. Investors can rely on these stocks to weather market volatility, providing a sense of security that smaller or less established companies cannot.

RY, FTS, and CNR also offer consistent dividend income, which is a key attraction for many Canadian investors. These dividends not only provide a steady income stream but also enable reinvestment opportunities, compounding returns over time. This is especially important for those looking to build wealth within a Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP).

Looking to the future, the outlook for these companies remains robust. RBC is set to benefit from its strong presence in both Canadian and international markets. Fortis, with its focus on clean energy and infrastructure investments, is poised to grow alongside global efforts to transition to renewable energy sources. Meanwhile, CNR’s strategic investments in rail infrastructure and technology ensure its continued dominance in the transportation industry.

Another advantage of holding blue-chip stocks is their role in preserving capital. While growth stocks can offer higher returns, they often come with increased risk. Blue-chip stocks provide a balanced approach, combining modest capital appreciation with reliable income. This makes them an excellent choice for conservative investors or those nearing retirement.

Foolish takeaway

Want more reason to buy? These stocks are widely held by institutional investors, further enhancing credibility. The consistent performance and high trading volumes of blue-chip stocks like RY, FTS, and CNR mean they are less susceptible to extreme price swings, ensuring stability in a portfolio.

Blue-chip stocks should, therefore, form the foundation of every portfolio due to stability, consistent performance, and reliable dividends. With RY, FTS, and CNR leading the pack on the TSX, investors have a golden opportunity to secure long-term growth and income. These blue-chip stocks not only reflect the strength of the Canadian economy but also offer peace of mind in an ever-changing market landscape.