Long-term investing involves buying and holding stocks over an extended period to maximize potential returns. This strategy would benefit from the power of compounding, while shielding against short-term fluctuations. To increase one’s investments 10-fold, one must achieve an annualized return of 25.9% over 10 years or 12.2% over 20 years.
Earning returns above 25% consistently over the long term is highly challenging. Thus, I believe targeting an annualized return of around 12.2% over 20 years is a more realistic and achievable goal. Therefore, let’s take a closer look at two Canadian stocks with the potential to generate an average annualized return exceeding 12.2% over the next 20 years.
Image source: Getty Images
Dollarama
Dollarama (TSX: DOL) offers a diverse range of consumer products at competitive prices, allowing it to sustain strong sales even in challenging economic conditions. The Montreal-based discount retailer has adopted a direct sourcing business model, removing intermediatory expenses and strengthening its bargaining power. In addition to its business model, Dollarama’s efficient logistics network has helped lower costs, enabling the company to pass on savings to its customers. Supported by this healthy financial performance, the company has delivered an impressive 514% return in the last 10 years at an annualized rate of 19.9%.
Additionally, Dollarama is actively expanding its store network, aiming to increase its count from 1,665 at the end of the second quarter of fiscal 2026 to 2,200 by the end of 2034. Given its efficient capital investment model, lower network maintenance capital expenditure requirements, quick sales ramp-up, and shorter payback period, these expansions could boost its top and bottom lines. Additionally, the company is expanding its digital footprint and leveraging technological innovations to enhance customer experiences and improve operational efficiency.
Dollarama also recently entered the Australian retail market with the acquisition of The Reject Shop, which operated 395 stores nationwide. The company has planned to expand its presence to 700 stores by the end of 2034, thereby supporting its financial growth in the coming years.
Additionally, Dollarama owns a 60.1% stake in Dollarcity, which operates 658 stores across five countries in Latin America. Meanwhile, Dollarcity plans to add 392 stores over the next six years, increasing its store count to 1,050 by the end of 2031. Dollarama also has the benefit of raising its stake in Dollarcity to 70% by exercising its option by 2027. Meanwhile, Dollarama has also rewarded its shareholders by raising its dividend 14 times since 2011, while its forward yield stands at 0.24%. Considering all these factors, I expect the momentum in Dollarama’s stock price to continue, thereby delivering impressive returns in the long term.
Shopify
Next on my list is Shopify (TSX: SHOP), which offers internet infrastructure to businesses worldwide, empowering them to launch and scale their operations. Supported by its solid financial performances, the company has returned 4,575% in the last 10 years at an annualized rate of 46.9%. Meanwhile, I expect the uptrend to persist as more businesses are adopting the omnichannel selling model.
Additionally, Shopify continues to introduce innovative products to meet evolving customer needs. The company is also leveraging artificial intelligence (AI) to develop smart solutions and features that enhance the customer experience. Additionally, the company has been expanding its payment solutions into new markets and introducing features that facilitate cross-border transactions, allowing merchants to accept payments in multiple currencies. Given these numerous growth catalysts, I am confident that Shopify has the potential to deliver 10-fold returns over the next 20 years.
