Canadian equity markets have extended their upward momentum this year, with the S&P/TSX Composite Index gaining 3.2%. However, rising geopolitical tensions, renewed uncertainty stemming from Donald Trump’s push to acquire Greenland, and the United States’ threat to impose tariffs on imports from European countries have raised concerns about the global outlook. Amid this uncertainty, I believe the following three stocks would make excellent additions to a well-diversified portfolio.
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Dollarama
Dollarama (TSX:DOL) is a leading discount retailer operating 1,684 stores in Canada and 401 in Australia. Supported by a superior direct sourcing model and streamlined logistics, the company keeps operating costs low while offering a wide range of consumer products at attractive price points. This value-driven model supports strong customer traffic regardless of broader macroeconomic conditions. Dollarama is also expanding its footprint, with plans to increase its Canadian store count to 2,200 by fiscal 2034 and its Australian network to 700 stores.
In addition, Dollarama owns a 60.1% stake in Dollarcity, which operates 683 stores across Latin America. Dollarcity is pursuing an aggressive expansion strategy and expects to grow its store base to 1,050 locations by the end of 2031. The discount retailer also has the option to increase its ownership stake to 70% by the end of next year, which could further enhance Dollarcity’s earnings contribution.
With multiple growth drivers across Canada, Australia, and Latin America, Dollarama appears well-positioned for continued expansion, making it an attractive buying opportunity at current levels.
Extendicare
Second on my list is Extendicare (TSX:EXE), which provides a broad range of senior care and services across Canada through several well-established brands. The Markham-based company has delivered strong shareholder returns of approximately 118% over the past 12 months, supported by solid quarterly performance and continued acquisition-led growth.
Looking ahead, demographic tailwinds from Canada’s aging population could drive sustained demand for Extendicare’s services. To capitalize on this growth, the company continues to expand its footprint. Notably, its subsidiary ParaMed is in the process of acquiring CBI Home Health, a provider of comprehensive home health care services operating across seven Canadian provinces. CBI generated $61.9 million in adjusted EBITDA over the trailing 12 months as of July 31, 2025.
This acquisition could strengthen Extendicare’s presence in Western Canada and enhance its overall growth profile. Management also expects to generate approximately $7.4 million of synergies over the next two years through IT integration and other cost efficiencies.
In addition to its growth prospects, Extendicare offers a monthly dividend of $0.042 per share, yielding 2.2% on a forward basis. Combined with its attractive forward price-to-sales multiple of 1, these factors make Extendicare a compelling buying opportunity at current levels.
Hydro One
Hydro One (TSX:H) is a pure-play electricity transmission and distribution company with no exposure to power generation or commodity price fluctuations. Approximately 99% of its business is rate-regulated, providing stable and predictable cash flows and insulating its financial performance from market volatility. Supported by this structure, Hydro One has grown its rate base at a compound annual rate of 5.1% since 2017, driving steady earnings and share price growth. Over the past five years, the company has delivered a total shareholder return of 113%, representing an annualized return of 16.1%.
Looking ahead, electricity demand is expected to rise due to accelerating electrification, the expansion of AI-ready data centres, and continued economic growth. To capitalize on these trends, Hydro One has outlined a $11.8 billion capital investment plan to expand its asset base. These investments could increase the company’s rate base at an annualized rate of approximately 6% to $32.1 billion by 2027.
Supported by this growth, management expects earnings per share to increase at a compound annual rate of 6–8% through 2027, enabling dividend growth of around 6% annually. With a forward dividend yield of 2.5% and a reasonable forward price-to-earnings multiple of 24.4, Hydro One appears to be an ideal buy at current levels.
