2024 was a year of surprises for Canadian stocks. Just the fact that the TSX Composite Index rose by nearly 20% was a major surprise. That return was almost three times the index’s average.
There were plenty of other surprises. In fact, here are two stocks that surprised to the downside and one that surprised to the positive in 2024.
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This major Canadian bank stock fell from grace
Many dividend investors were caught off guard in 2024. Despite interest rates coming down, many Canadian dividend stocks did not perform as well as expected.
The first major example is Toronto-Dominion Bank (TSX: TD). Its stock fell by 12%. Luckily, with its dividend, its total return was a little better at -7.4%.
TD used to be one of Canada’s premium bank stocks. It was seen as a comparable premium peer to Royal Bank (Canada’s largest bank). This deserved it a premium valuation to the other Canadian banks. Many investors gave TD a higher value because of its large U.S. operations.
However, those U.S. operations would come to haunt TD. The U.S. business had some serious compliance issues. Allegations of money laundering and fraud came to light. Regulators were not happy, and TD was forced to pay some substantial penalties and fines for its sins.
Today, TD has lost its premium status both as a bank and as a stock. It trades for 10.5 times earnings, nearly three churns below Royal Bank. The bank still has plenty of issues to work out. This is affecting customer loyalty. Despite its attractive 5.1% dividend yield, I wouldn’t touch this Canadian stock in 2025.
This Canadian dividend stalwart might need to cut its dividend
BCE (TSX: BCE) is another Canadian dividend stock that fell off a cliff. I think many investors expected improving interest rates would act as a lift for the stock. Unfortunately, that wasn’t the case. The stock fell by 40% in 2024. Its yield went from 6.9% to over 12.5% today.
Even after significant layoffs and operational cuts, the company cannot seem to rightsize its balance sheet. Despite its huge debt load (and horrible stock performance), it announced the $5 billion acquisition of Zipfly. If anything, that move made investors even more leery to hold this stock.
With a yield of 12.5%, its dividend is clearly not sustainable. Pricing wars and tough regulations are impacting its ability to generate cash flow, and its balance sheet keeps getting worse. Unfortunately, BCE’s board refuses to cut its dividend. I wouldn’t touch this Canadian stock in 2025, even if the dividend were cut.
This Canadian manufacturer delivered the top return in 2024
I don’t think anyone could have predicted that Celestica (TSX: CLS) would be the top-performing Canadian stock in 2024. Its stock rose 242% last year!
Celestica has long been known as a contract electronics manufacturer. This was generally a high-volume, low-margin business. However, the AI revolution has also revolutionized its business.
Data centre demand for networking and connectivity hardware helped drive up volumes and increase margins. In 2024, revenue increased 21%, and earnings per share increased 78%. Artificial intelligence hype helped propel this stock from a price-to-earnings ratio of 14 in 2023 to 35 today.
Given the valuation and high expectations, I wouldn’t add to this stock right now. However, Celestica is and likely will be an interesting Canadian stock story to watch in the year ahead.
