Investing in high-quality Canadian stocks with solid growth prospects can generate significant gains in the long term. However, it is important to buy fundamentally strong stocks with strong financials, reliable business models, and secular tailwinds. These stocks are more likely to offer above-average returns.
So, if you plan to invest $500, these dead-easy Canadian stocks have solid long-term potential.
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Hydro One stock
Hydro One (TSX: H) is a solid Canadian stock offering a mix of growth, income, and stability. The leading utility company operates a defensive business model focused on regulated electricity transmission and distribution. These areas are largely shielded from the risks of power generation and commodity price swings. This stable setup ensures predictable earnings and steady cash flow, which, in turn, supports its share price and dividend growth.
Over the past few years, Hydro One’s performance has been impressive. The stock has gained more than 76% in value in the last three years and over 100% in the past five years. Since 2016, the company has steadily increased its dividend, thanks to its low-risk earnings and expanding rate base. From 2016 to 2022, its dividends grew at a compound annual growth rate (CAGR) of 5%, accelerating to 6% annually from 2022 onward.
Looking ahead, Hydro One is well-positioned for continued growth. Its rate base is projected to expand by 6% annually through 2027, driving earnings at a CAGR of 6-8% over the same period. This will help Hydro One to increase its dividend by 6% annually in the medium term.
With a strong balance sheet, reliable cash flows, and a disciplined capital-allocation strategy, Hydro One remains well-equipped to fund growth opportunities while maintaining its low-risk profile. Additionally, increasing electricity demand, driven by population growth and the expansion of data centres, provides further upside potential.
MDA Space stock
MDA Space (TSX: MDA) is another compelling stock to buy now. Shares of this space technology company have lost considerable value in the recent past after EchoStar abruptly cancelled a multi-billion-dollar satellite contract and sold its spectrum licenses to SpaceX. However, the company’s fundamentals remain solid, and it is likely to benefit from the expansion of the space economy. Also, it maintains a solid backlog, and management reiterated full-year guidance. All these indicate that the recent dip in MDA Space stock is a solid buying opportunity.
Despite the recent pullback, MDA Space stock is still up over 423% in three years, and the rally is far from over. Even excluding the EchoStar deal, the company maintains a substantial $4.6 billion backlog, which offers visibility over future revenue growth. Further, the momentum in its businesses, including Satellite Systems, Robotics & Space Operations, and Geointelligence divisions, will likely sustain as governments and private enterprises ramp up investments in satellite communications, defence technologies, and earth observation.
With rising global demand for space-based solutions, MDA’s diversified portfolio and cost-competitive offerings position it to benefit from these trends. Moreover, its strong balance sheet gives it the flexibility to invest in innovation and capture new opportunities.
