Long-term investing is one of the most effective strategies for building wealth. By staying invested for extended periods, investors can benefit from compounding while reducing the impact of short-term market volatility. Additionally, long-term investing requires less frequent portfolio monitoring, making it a suitable approach for all kinds of investors.
However, selecting the right stocks is crucial. Investors should look to invest in companies with strong fundamentals, durable competitive advantages, and promising long-term growth prospects.
Importantly, turning a $100,000 investment into $1 million over 20 years would require an annualized return of approximately 12.5%. With that in mind, here are two Canadian stocks that could deliver annualized returns exceeding 12.5% over the long term.
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Dollarama
Dollarama (TSX: DOL) is a leading discount retailer with 1,691 stores across Canada and 402 stores in Australia. The company benefits from an efficient direct-sourcing model that reduces intermediary costs while enhancing its negotiating power with suppliers. In addition, its streamlined logistics network helps keep operating expenses low, enabling the retailer to offer products at compelling price points. These advantages have allowed Dollarama to generate strong same-store sales growth regardless of broader economic conditions.
The retailer has also consistently expanded its footprint, growing its store count from 652 locations in 2011 to its current level. This expansion has significantly boosted both revenue and earnings over time. Over the last decade, Dollarama’s revenue and net income have increased at annualized rates of 10.6% and 11.4%, respectively, supporting exceptional stock price appreciation. During this period, the stock has delivered total returns of more than 505%, representing an impressive annualized return of 19.7%.
Looking ahead, Dollarama still has substantial growth opportunities. Management plans to expand its Canadian store network to 2,200 locations and increase its Australian footprint to 700 stores by the end of 2034. Given the company’s capital-efficient business model, rapid sales ramp-up, short payback periods, and relatively low maintenance costs, these store additions could continue driving strong top- and bottom-line growth.
In addition, Dollarama owns a 60.1% stake in Dollarcity, which currently operates 732 discount stores across Latin America. Dollarcity plans to increase its store count to 1,050 by fiscal 2031, creating another meaningful growth avenue. Dollarama also holds the option to raise its ownership stake in Dollarcity to 70% by the end of next year, which could further strengthen its earnings contribution in the years ahead.
Considering its resilient business model, consistent expansion strategy, and strong long-term growth prospects, I believe Dollarama would be an ideal stock for long-term investors.
Waste Connections
Waste Connections (TSX: WCN) operates across secondary and exclusive markets in the United States and Canada, providing non-hazardous solid waste collection, transportation, and disposal services. It has consistently expanded its operations through organic growth and strategic acquisitions, driving strong financial performance and long-term stock appreciation. Over the last decade, WCN has delivered total returns of nearly 300%, representing an annualized return of approximately 14.8%.
The company also continues to invest in growth initiatives to strengthen its long-term outlook. After bringing six renewable natural gas (RNG) facilities into service, WCN is working to commission several additional facilities by the end of this year. Also, supported by strong cash flows, healthy financial performance, and a solid balance sheet, the company remains well-positioned to pursue acquisitions aggressively.
It currently has a robust acquisition pipeline comprising several private businesses with a combined annualized revenue of roughly $5 billion. These acquisitions could further expand its market presence and strengthen its earnings growth over time.
In addition to expansion initiatives, WCN focuses on improving operational efficiency. Higher employee engagement, improving safety metrics, and the adoption of advanced technologies could further enhance productivity and profitability in the years ahead.
Given its resilient business model, consistent growth strategy, and strong execution capabilities, I believe WCN remains an attractive long-term investment for investors seeking steady capital appreciation.
