Building a portfolio that can compound wealth for decades doesn’t require owning dozens of stocks. In fact, I’d argue that Canadian investors are better served by focusing on a shorter list of high-quality businesses that can withstand economic downturns, grow their earnings, and return cash to shareholders.
If I were building a long-term Canadian portfolio today, these five stocks would be near the top of my list. They offer a combination of defensive stability, dividend growth, financial strength, energy exposure, and long-term growth potential.
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Loblaw
Loblaw (TSX:L) is the kind of stock investors can hold through any economic environment. As Canada’s largest food and pharmacy retailer, Loblaw benefits from recurring demand for groceries, household essentials, and health products across more than 2,400 stores.
That consistency has translated into impressive long-term returns. Over the past 20 years, a $10,000 investment, with dividends reinvested, would have grown to roughly $87,490, representing annualized returns of about 11.5%. That comfortably beats the approximately 8.8% annualized return generated by iShares S&P/TSX 60 Index ETF, a Canadian large-cap benchmark, over the same period.
Loblaw’s roughly 1% yield isn’t particularly exciting, but its dividend has grown at about 8% annually over the past decade. For investors seeking a dependable compounder, Loblaw should be on your watchlist despite its low yield.
Canadian Natural Resources
Canadian Natural Resources (TSX:CNQ) provides something Loblaw doesn’t: significant exposure to the energy sector. Despite volatile oil prices, CNQ has created substantial long-term value, turning $10,000 into approximately $86,940 over the past 20 years, with dividends reinvested.
At a recent price of $68.83, CNQ offered a dividend yield of roughly 3.6%. Even better, the company has increased its dividend for approximately 25 consecutive years. Its dividend has grown at roughly 20% annually over two decades. For long-term investors, market pullbacks can provide opportunities to lock in a higher yield on this blue-chip energy stock.
Royal Bank of Canada
Royal Bank of Canada (TSX:RY) is another stock I believe belongs in a core Canadian portfolio. Its diversified operations span banking, wealth management, insurance, and capital markets, with more than half of earnings generated in Canada and substantial exposure to the U.S.
RBC’s dividend has grown at approximately 7.6% annually over the past 15 years. If earnings continue growing at around 7% annually, the bank should have room to continue increasing its dividend at that rate over time. RBC has also been an exceptional recent performer, delivering nearly 37% annualized returns over the past three years, including dividend reinvestment, versus roughly 25% for XIU.
Brookfield
For growth, Brookfield (TSX:BN) is difficult to overlook. Brookfield invests in essential real assets and businesses globally, deploying capital alongside institutional and individual investors.
Over the past 20 years, a $10,000 investment in Brookfield would have grown to roughly $102,670 with dividends reinvested, or about 12.4% annually. Its dividend has also grown by nearly 10% annually over the past decade. Its growth potential makes Brookfield a compelling buy-on-weakness candidate for investors with a long time horizon.
Premium Brands is a higher-risk opportunity
Premium Brands Holdings (TSX:PBH) is the wild card.
Unlike the other names, Premium Brands isn’t necessarily a stock I’d buy at any price. However, its near-term growth opportunity makes it worth considering after the significant pullback.
The company expects to reach approximately $10 billion in sales and $1 billion in earnings before interest, taxes, depreciation, and amortization (a cash flow proxy) by next year, supported by U.S. expansion, high-growth food categories, and new manufacturing capacity. Its decentralized model brings together numerous specialty food businesses serving more than 22,000 corporate and commercial customers across North America.
At a recent price of $79.58, the stock offered a dividend yield of roughly 4.3%. More importantly, the analyst consensus price target implied approximately 29% upside, suggesting the market may be underappreciating its growth potential.
The bottom line
No stock is guaranteed to outperform, and valuation always matters. But these five companies provide something I value highly in a long-term portfolio: durable businesses with proven track records and identifiable avenues for future growth. Canadian investors looking to build wealth over decades can look more closely at these five names.
