Long-term investing is an excellent strategy for creating wealth. It allows investors to benefit from the power of compounding while lowering the impact of short-term fluctuations. This strategy also reduces transaction expenses and does not require investors’ regular attention. Against this backdrop, let’s look at my two top picks for superior long-term returns.
Dollarama
Dollarama (TSX:DOL) is a Canadian discount retailer that operates 1,616 stores across Canada, with 85% of Canadians having at least one store within a 10-kilometre radius. The company has built superior direct-sourcing and buying capabilities, which lower its intermediary expenses and increase bargaining power. Also, its efficient logistics allow it to offer a wide range of consumer products at compelling prices. Therefore, the Montreal-based retailer enjoys healthy footfalls even during a challenging macro environment, thus posting consistent financials.
Over the last 14 years, the company has expanded its store count from 652 to 1,616, driving its top and bottom lines. Meanwhile, its revenue has increased at an annualized rate of 11.4%, while net income has grown at a 17.9% CAGR (compound annual growth rate). Also, the retailer has expanded its EBITDA (earnings before interest, tax, depreciation, and amortization) from 16.5% in fiscal 2011 to 33.1% in fiscal 2025.
Moreover, Dollarama continues to expand its footprint and expects to raise its store count to 2,200 by the end of fiscal 2034. Given its capital-efficient growth-oriented business model, quick sales ramp-up, and lower maintenance expenses, these expansions could boost its profits. The company also has a solid presence in Latin America through a 60.1% stake in Dollarcity, which operates 632 stores. Dollarcity plans to increase its store count to 1,050 by the end of 2031. Further, Dollarama can increase its stake to 70% by exercising its option by 2027.
Dollarama is also working on entering the Australian retail market by acquiring The Reject Shop, which operates 390 discount stores, for $233 million. Given the customary closing conditions, the management expects to close the deal in the second half of this year. Considering its solid financials and healthy growth prospects, I expect Dollarama to continue its financial growth, thus delivering superior returns in the long run.
Fortis
Fortis (TSX:FTS) is my second pick. The company operates 10 regulated utility assets, serving 3.5 million customers. Its financials are less prone to economic volatility, with 93% of assets involved in the low-risk transmission and distribution business. Supported by these stable financials, FTS stock has delivered an average total shareholders’ return of 10.2% in the last 20 years, beating the broader equity markets. Also, the utility operator has raised its dividends uninterruptedly for the previous 51 years and currently offers a healthy dividend yield of 3.6%.
Moreover, Fortis continues to expand its asset base with its $26 billion capital investment plan. These investments could grow the utility company’s rate base at an annualized rate of 6.5% through 2029 to $53 billion. The company expects to meet around 70% of these investments through the cash generated from its internal operations and dividend reinvestment plan. So, these investments won’t substantially increase its debt levels. Besides, the adoption of innovative practices and efficiency programs could continue to drive its profitability in the coming years. Amid these growth initiatives, Fortis’s management expects to raise its dividend by 4–6% annually through 2029, making it a compelling long-term buy.
