For Canadian investors looking to build long-term wealth, the ideal stock offers both reliable dividends and steady capital appreciation. These two income streams, when combined, can provide powerful compounding over time.
Here are three top Canadian stocks I’d buy for both dividends and capital growth. What’s common among them? They all have durable business models and proven histories of increasing shareholder value.
Dollarama
Dollarama (TSX:DOL) is a Canadian retail success story. With over 1,600 discount stores nationwide, it sells a broad range of low-priced household goods, seasonal items, and party supplies — all priced to appeal to cost-conscious consumers. Categorized under the consumer defensive sector, Dollarama tends to thrive even during economic downturns as shoppers increasingly seek value.
While its dividend yield is a meagre 0.2%, that’s not where the appeal lies. Dollarama’s real strength is in capital appreciation and strong dividend growth. Over the past decade, the company has multiplied investors’ capital more than sixfold — turning a $10,000 investment into over $63,000. This equates to an annualized return of approximately 20%.
Its dividend growth has been equally impressive. Dollarama has increased its dividend at a five-year compound annual growth rate (CAGR) of roughly 15%. Unfortunately, the stock appears to be expensive today, trading at a forward price-to-earnings (P/E) ratio of 40 — its highest in history. Any weakness would make the stock more appetizing.
Imperial Oil
Imperial Oil (TSX:IMO) is one of Canada’s leading integrated energy companies. With a business spanning oil sands production, refining, and retail distribution (through Esso and Mobil), Imperial is well-positioned to deliver strong shareholder returns across commodity cycles.
In the past 10 years, Imperial turned a $10,000 investment into nearly $38,500, an annualized return of 14.4%. Its dividend performance has been nothing short of stellar, with a 10-year CAGR of 16.5% and an even stronger five-year rate of 23%. That level of consistent growth is exactly what long-term investors want.
Currently, the stock yields about 2.3% and trades at around $126 per share. It’s had a big run — up 32% over the past year — so investors may prefer to wait for a pullback.
Manulife
Manulife (TSX:MFC) is a major player in the global financial services space, offering insurance, wealth management, and financial advisory services. Its operations stretch across Canada, the U.S., Asia, and Europe — providing broad geographic diversification and growth potential.
A $10,000 investment in Manulife 10 years ago would now be worth approximately $32,830, representing annualized returns of 14.6%. Its dividend growth track record is strong, with both five-year and 10-year CAGRs sitting around 10%.
At about $43 per share, Manulife appears reasonably priced, trading at a modest P/E of 10.9. More importantly, it offers an attractive dividend yield of just over 4%. The stock has been consolidating since late 2024, which may be a cue for income-seeking investors to take a nibble.
Investor takeaway
These three Canadian companies offer different paths to the same goal: a growing income stream paired with long-term capital gains. Dollarama provides growth, Imperial Oil offers high dividend-growth potential from energy, and Manulife offers income with global exposure. Together, they make a powerful trio for any long-term investor, though it would be wonderful if they could pull back to provide safer entry points.
