High inflation and a restrictive monetary policy harmed equities markets, including the Toronto Stock Exchange. Fortunately, the bane turned to boom when the rate-cutting cycle began. The Bank of Canada has reduced its policy rate seven times since June 2024; the latest was this month.
Some market analysts expect these developments to become tailwinds for Canadian small-cap stocks. Valentin Padure, vice president and lead portfolio manager of Canadian small-caps at BMO Global Asset Management, said, “We are bullish on small-cap equities for 2025.”
Three stocks in the S&P/TSX SmallCap Select Index display steady performance and positive returns, notwithstanding the elevated market volatility. The best buys right now are Badger Infrastructure Solutions (TSX: BDGI), Slate Grocery (TSX: SGR.UN), and Dundee Precious Metals (TSX: DPM). All three are quality growth companies.
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Industrial
Badger Infrastructure Solutions operates in the engineering and construction industry. The $1.35 billion company provides non-destructive hydro-excavation (hydrovac) services in North America. Its Badger Hydrovac, a non-destructive excavation system, uses pressurized water and a powerful vacuum to excavate infrastructure — exposed and buried. Allied services include locating, sewer, and disaster response.
The business thrives, as evidenced by the full-year 2024 results. In the 12 months ending December 31, 2024, total revenue and net earnings increased 9% and 15% to US$744.9 million and US$47.8 million. If you invest today, the share price is $39.80 (+10.98% year to date), with a dividend offer of 1.89%.
Real estate
Slate Grocery in the real estate sector has gained +37.44% thanks to the improving rate environment. This $826 million real estate investment trust (REIT) owns a high-quality property portfolio in the U.S. (23 states). At $14.18 per share, you can partake in the hefty 8.89% dividend and receive monthly income streams. You’d be investing in a pure-play U.S. grocery-anchored real estate (94.8% of the 116 properties).
Its chief executive officer (CEO), Blair Welch, notes the high leasing volumes at double-digit spreads in the last several quarters, resulting in higher net operating income (NOI). In 2024, rental revenue rose 3% to US$209 million versus 2023, while net income climbed 134% year over year to US$50.6 million. The portfolio occupancy at year-end is also 94.8%.
“We expect our robust pipeline of new leasing opportunities to support a continued positive trend for occupancy in the coming quarters,” Welch added.
Basic materials
Dundee Precious Metals continues to beat the broad market year to date at +41.41% versus +2.33%. Basic materials is also the top-performing sector thus far in 2025 with +20.32%. At $18.44 per share, DPM pays a modest 1.24% dividend. It carries a “buy” to “strong-buy” rating from market analysts.
The $3.2 billion gold mining company operates in Canada, Bulgaria, Ecuador, and Serbia. In 2024, revenue and net earnings increased 17% and 34% year over year to $607 million and $243 million. Free cash flow (FCF) jumped 34% to $305 million from a year ago.
Management is confident that Dundee can deliver superior value because of its strong, sustainable gold production and cost profile. The platform and pipeline assure robust and above-average shareholder returns.
High-quality companies
Badger, Slate Grocery, and Dundee are high-quality growth stocks. The strong fundamentals of the respective businesses should withstand market volatility. Investors will also earn in two ways: price appreciation and dividend income.
