The TSX has several stocks that have consistently outpaced the broader market with their returns and still have significant growth potential, making them no-brainer investments. Against this background, here are three Canadian stocks with strong fundamentals to buy in August.
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Dollarama stock
Dollarama (TSX: DOL) offers stability, growth, and income, making it a no-brainer Canadian stock. This leading discount-chain operator sells a wide range of consumables, general merchandise, and seasonal products at low and fixed price points. Thanks to this value pricing strategy, the retailer consistently drives traffic and retains its customer base.
Despite operating a defensive business, Dollarama has outperformed the broader markets with its capital gains. Over the past five years, its share price has soared about 304%, reflecting a compound annual growth rate (CAGR) of about 32.2%. The retailer also remains committed to enhancing its shareholder value by returning higher cash. Notably, it has raised its dividend 14 times since 2011 and will likely maintain this streak.
Looking ahead, Dollarama’s low-price strategy, wide product range, and strong supply chain will likely boost its financial performance and deliver solid growth. Moreover, its expansion of new stores will continue to attract more shoppers. Further, its focus on acquisitions and international expansion will accelerate its growth and support its dividend and share price.
Hydro One stock
Hydro One (TSX: H) is another no-brainer Canadian stock to buy in August. Its regulated electricity transmission and distribution operations remain immune to commodity price swings, helping it generate predictable and low-risk earnings.
Thanks to its defensive business and solid financials, shares of this utility company have grown at a CAGR of 16.5% over the last five years, delivering capital gains of 114.6%. Besides outperforming the TSX with its growth, Hydro One has raised its dividend at a 5% CAGR over the past eight years.
Hydro One’s robust balance sheet, predictable cash flows, and an expanding rate base position it well to deliver solid growth. Further, the growing demand for energy is a positive. Looking ahead, its rate base is projected to grow at a 6% CAGR through 2027, which is expected to drive annual earnings growth of 6-8% and support dividend increases of about 6% annually during that period.
In short, Hydro One is a dependable stock to boost the stability, income, and growth potential of your portfolio.
Aritzia stock
Aritzia (TSX: ATZ) is another attractive Canadian stock you can afford to miss. The women’s clothing and accessories company has been consistently delivering solid financials led by the strong demand for its products, its ability to add newness to its offerings, and geographic expansion.
Notably, its top line has grown at a CAGR of 23% since FY20. At the same time, its adjusted net income has increased at a CAGR of 19%. Thanks to its solid financials, Aritzia stock has increased at a CAGR of about 34% over the last five years, translating into a capital gain of approximately 329%.
Looking ahead, Aritzia’s management projects its top line to grow at a CAGR of 15% to 17% through fiscal 2027. The company’s focus on opening new boutiques, increasing brand visibility, and ongoing momentum in its e-commerce business will likely support its top line.
The double-digit increase in its revenue, improved inventory management, and operational efficiency position it well to generate solid earnings, which will likely drive its stock price.
