Getting started with equity investing can feel overwhelming, especially with so many stocks to choose from. For beginners, it often makes sense to focus on TSX stocks backed by resilient business models, strong competitive positions, reliable earnings, and solid balance sheets. Businesses with these qualities are better positioned to navigate economic uncertainty and deliver solid total returns through capital gains and higher dividend payments.
If you’re a beginner looking for fundamentally strong top TSX stocks, here are my top three picks.
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Top TSX stock #1: Hydro One
Hydro One (TSX: H) is a relatively stable option for beginners who want a mix of income and long-term growth. The company focuses on transmitting and distributing electricity and doesn’t own power-generation assets. That makes its business model less exposed to some of the risks associated with electricity generation.
Another key advantage is that most of Hydro One’s revenue comes from regulated operations. This gives the utility company a steady, predictable stream of cash flow, even when the broader economy is weaker. Thanks to its defensive business model and predictable cash flow, Hydro One has consistently increased its dividend. Moreover, it has delivered decent capital gains.
Since 2016, Hydro One has grown its dividend at a mid- to high-single-digit compound annual growth rate (CAGR). Further, Hydro One stock has increased at a CAGR of over 14% in the last five years, generating solid total returns.
Looking ahead, Hydro One’s rate base is likely to expand at a mid-single-digit rate, driving earnings, dividend payments, and share price. The company is also likely to gain from rising electricity demand, investments in modernizing the power grid, its solid balance sheet, and a fully funded capital program.
Top TSX stock #2: Dollarama
Dollarama (TSX: DOL) is another top TSX stock beginners could consider. The discount retailer operates a relatively defensive business, allowing it to maintain demand even during periods of economic uncertainty. Its low, fixed-price offerings, broad product assortment, and growing range of private-label merchandise help attract customers while supporting healthy profit margins.
Dollarama continues to benefit from its value pricing strategy and store expansion. With growing revenue and earnings, Dollarama has consistently increased its dividend since 2011. Alongside solid income, Dollarama’s shareholders have benefited from solid capital gains. Dollarama stock has appreciated about 240% over the past five years, growing at a compound annual growth rate (CAGR) of more than 27%.
The discount retailer is poised to deliver solid growth ahead. Dollarama continues to add stores, while its international operations create additional growth opportunities. Its focus on value-oriented pricing, relationships with third-party delivery services, and efficient procurement practices strengthen revenue and margins. These factors position it to deliver solid total returns in the years ahead.
Top TSX stock #3: Brookfield Infrastructure Partners
Brookfield Infrastructure Partners (TSX: BIP.UN) is a top TSX stock for beginners to generate solid total returns. It owns and operates essential infrastructure across areas such as utilities, transportation, energy infrastructure, and digital services. Many of these assets benefit from regulated frameworks or long-term contracts, supporting relatively stable cash generation.
Since 2009, Brookfield Infrastructure has delivered double-digit growth in funds from operations (FFO), supported by resilient demand and its diversified asset base. Roughly 85% of FFO is generated from contracted or regulated activities, with much of the business benefiting from inflation-linked or inflation-protected revenue streams.
Its resilient and growing cash flow has enabled it to raise its distribution for 17 straight years. Moreover, the company aims to grow its annual distribution by about 5% to 9% in the years ahead. Brookfield Infrastructure’s target payout ratio of 60% to 70% positions it to return cash while retaining capital to fund growth initiatives.
Looking ahead, the company is well-positioned to benefit from AI infrastructure expansion, which is driving demand for power and digital assets. Moreover, the ongoing investment in energy and transportation augurs well for growth.
Overall, Brookfield offers reliable income and has the potential to deliver solid capital gains led by ongoing infrastructure investments.
