Last year was impressive for the Canadian equity markets, with the S&P/TSX Composite Index climbing roughly 29% amid broad-based gains. However, concerns about lofty valuations after this strong run, the risk of an AI-driven market bubble, ongoing geopolitical tensions, and persistently sticky inflation remain top of mind for many investors. If you share these concerns and are looking to fortify your portfolio against volatility, it’s prudent to focus on quality defensive stocks that can deliver stable performance in any market environment.
Against this backdrop, let’s assess two noteworthy defensive names on the TSX — Dollarama (TSX: DOL) and Waste Connections (TSX: WCN) — to determine which of these two stocks would be a superior defensive bet this year.
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Dollarama
Dollarama is a leading discount retailer operating 1,684 stores in Canada and 401 stores in Australia. Its superior direct-sourcing capabilities and highly efficient operations help keep costs low, enabling the company to offer a wide range of products at attractive price points. As a result, Dollarama consistently generates healthy same-store sales growth, largely independent of broader economic conditions.
In addition to strong same-store performance, the company has steadily expanded its store footprint, growing from 652 locations in fiscal 2011 to 1,684 stores today. This combination of organic growth and expansion has translated into robust financial performance, with revenue and net income increasing at annualized rates of 11.5% and 18%, respectively. Supported by these solid fundamentals, Dollarama has delivered returns of over 695% during the past decade, representing an impressive annualized return of 23.1%.
Looking ahead, the Montreal-based retailer continues to pursue an aggressive growth strategy. Management expects to increase its Canadian store count to 2,200 and expand its Australian footprint to 700 stores by the end of fiscal 2034. Given its cost-efficient, growth-oriented business model, these expansions should support continued growth in both revenue and earnings.
Further strengthening its long-term outlook, Dollarama owns a 60.1% stake in Dollarcity, which operates 683 stores across five Latin American countries. Dollarcity plans to expand its store count to 1,050 locations by the end of fiscal 2031, and Dollarama holds an option to increase its ownership stake to 70%. As Dollarcity continues to scale, its contribution to Dollarama’s net income is expected to rise meaningfully in the coming years. Overall, Dollarama’s growth prospects remain strong and well supported.
Waste Connections
Waste Connections operates across the United States and Canada, providing essential services such as the collection, transfer, and disposal of non-hazardous solid waste. The company faces limited competition, as it primarily operates in secondary and exclusive markets, which allows it to command stronger pricing power and maintain healthier operating margins.
In addition to steady organic growth, WCN has consistently expanded its footprint through strategic acquisitions. Over the past five years, the company has completed more than 100 acquisitions, contributing approximately $2.2 billion in annualized revenue. Supported by this disciplined growth strategy and solid financial performance, Waste Connections has delivered total returns of over 485% during the past decade, translating into an impressive annualized return of 19.4%.
Looking ahead, the Toronto-based waste management company maintains a robust acquisition pipeline of private operators across the United States and Canada, representing roughly $5 billion in annualized revenue. Backed by a strong balance sheet and healthy free cash flows, management expects to continue pursuing an active acquisition strategy in the years ahead.
Beyond acquisitions, WCN is leveraging technological advancements to enhance efficiency and profitability. The company is deploying robotics and optical sorters in its recycling facilities, along with AI-driven tools to optimize commercial overage charges and strengthen pricing discipline. Additionally, declining voluntary employee turnover amid improving employee engagement and safety metrics should further support margin expansion over the long term.
Investors’ takeaway
Supported by strong underlying businesses and consistent financial performance, both companies have delivered impressive returns over the past decade. However, I am more bullish on Dollarama, given the greater visibility into its long-term growth prospects and its consistently solid financial execution.
