Amid easing trade tensions and rising corporate profits, the Canadian equity markets have witnessed healthy buying over the last few weeks, with the S&P/TSX Composite Index rising 18.9% from its April lows. However, concerns over global growth still persist amid protectionist policies. Given the uncertain outlook, I would like to balance my portfolio with a mix of quality growth, defensive, and dividend stocks. Against this backdrop, let’s look at my three top picks.
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Celestica
Celestica (TSX:CLS) has delivered impressive returns of 1,104% over the last three years at an annualized rate of 131.5%. Solid financial performance and exposure to the high-growth artificial intelligence (AI) sector have supported its stock price growth. In the company’s recently reported first-quarter earnings, its top line grew 20% amid a 28% increase in the CCS (Connectivity & Cloud Solutions) segment and a 5% increase in the ATS (Advanced Technology Solutions) segment. A 99% increase in Hardware Platform Solutions’s revenue, which reached around $1 billion during the quarter, boosted the revenue from the CCS segment.
Moreover, the growing adoption of AI has led to increased investments in AI-related infrastructure, thereby driving demand for Celestica’s products and services. Amid the increased demand outlook for its CCS segment, the management has raised its 2025 guidance. The company now anticipates posting $10.9 billion in revenues this year, representing a 12.4% increase from the previous year. Additionally, its adjusted EPS (earnings per share) could come in at $5.00, representing a year-over-year increase of 28.9%. Despite its solid returns and impressive growth prospects, CLS stock trades at a reasonable next 12 months (NTM) price-to-sales multiple of 1.2, making it an excellent buy.
Waste Connections
Waste Connections (TSX:WCN) is a stellar defensive stock to have in your portfolio due to the essential nature of its business. The company collects, transfers, and disposes of non-hazardous solid wastes. It operates in secondary and exclusive markets across the United States and Canada, thereby facing less competition and enjoying higher margins. Additionally, the company has invested $6.5 billion since 2020, acquiring over 110 assets and driving its financial growth. Supported by this solid financial performance, the waste management stock has returned over 110% in the last five years at an annualized rate of 16%.
Moreover, WCN is building 12 renewable gas plants, which the management expects to become operational next year. Once operational, these facilities can contribute $200 million to the company’s annualized adjusted EBITDA (earnings before interest, tax, depreciation, and amortization). Given its solid financial position and healthy cash flows, the management predicts above-average merger and acquisition (M&A) activity this year. Considering its solid underlying business and healthy growth prospects, I am bullish on WCN.
Enbridge
Enbridge (TSX:ENB), an ideal dividend stock, is my final pick. The midstream energy company transports oil and natural gas across North America through a tolling framework and long-term take-or-pay contracts. It also operates low-risk utility assets and 37 renewable energy assets, selling the power generated from these facilities through long-term power purchase agreements (PPAs). Therefore, the company’s financials are less prone to economic cycles and commodity price fluctuations, thus generating stable and reliable cash flows.
Supported by these healthy cash flows, the pipeline giant has paid dividends uninterruptedly for 70 years. ENB stock has also raised its dividends at an annualized rate of 9% for the previous 30 years and currently offers a healthy forward dividend yield of 6%.
Moreover, Enbridge has identified $50 billion of growth opportunities over the next five years. It has also planned to invest $9–10 billion annually, expanding its rate base across its four segments. These growth initiatives could support its financial growth in the coming years. Amid these healthy growth prospects, the management expects to raise its dividends by 3% through 2026 and 5% thereafter, thus making it an enticing buy.
