The strong momentum and bull run of basic materials carried over into 2026 and appears poised to be the TSX’s top-performing sector for the second consecutive year. While mining heavyweights continue to lead the surge, lumber stocks are delivering market-beating returns.
Stella-Jones (TSX:SJ), Canfor Corporation (TSX:CFP), and Doman Building Materials (TSX:DBM) are worth watching right now. These companies offer operational leverage and have maintained resilience amid persistent price volatility and trade restrictions.
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Quality pick
Stella-Jones is close to eclipsing its 52-week high of $101.31. At $97.60 per share, the prime lumber stock has advanced nearly 20% in the last three months. Analysts’ high price target is $107. The 1.27% dividend yield is modest but is safe and sustainable (19.8% payout ratio).
The $4.5 billion company manufactures infrastructure solutions, notably treated wood products used as railway ties and utility poles, as well as residential and industrial lumber. It has also expanded into steel structures that support transmission lines.
Stella-Jones is more than 30 years old and benefits from the infrastructure-driven markets. The multi-year demand for utility poles and railway ties is a strong tailwind, driven by replacement and maintenance. Also, maintaining large inventories of treated and untreated wood cushions against supply interruptions.
The full-year 2025 results aren’t out yet, although sales have increased every year over the last 24 years, including 20 consecutive years of dividend increases.
Recovery play
Canfor Corporation manufactures low-carbon forest products, from structural lumber and premium boards to engineered beams, pulp, paper, and bioproducts. The $1.5 billion company produces high-quality wood products sourced from various locations and operations in Western Canada (19), the Southeastern U.S. (17), and Northern Europe (30).
The lumber stock is up 19.4% year to date, notwithstanding the significant operating losses throughout 2025. Investors are looking forward, anticipating lumber prices to recover soon. Meanwhile, diversification and expansion into Europe is the tailwind. It will counter high lumber duties in the United States and high log costs in Canada.
In December 2025, Canfor Corporation entered into an agreement to acquire outstanding common shares (45.2%) of Canfor Pulp Products, which it doesn’t yet own. According to management, the transaction rationale is the opportunity for a stronger combined business.
Passive-income source
Doman Building Materials attracts income-oriented investors for its generous payout. At $10.43 per share (+10.4% year to date), you can partake in the 5.42% dividend offer. Canada’s only fully integrated national distributor, through its subsidiaries, distributes building materials and home renovation products domestically and in the U.S.
The leverage of this $794 million company stems from a massive distribution network and a vertical model that enables better management of the entire supply chain. Expect Doman to capitalize on the strong “repair and remodel” market rather than new construction. However, volatile construction materials costs affect sales levels.
In the first three quarters of 2025, revenue and net earnings rose 26.6% and 50.9% year over year to $2.5 billion and $69.3 million, respectively. Based on the Bank of Canada’s forecast, growth should strengthen gradually over 2026 and 2027, with an annual growth average of 1.4%.
Choose your strategy
TSX lumber stocks have kept pace with the dominant mining stocks. You can choose Stella-Jones for defensive growth or Canfor for an aggressive lumber rebound. Doman is an excellent passive-income play.
