Written by Sneha Nahata at The Motley Fool Canada
Investors looking for stability and reliable returns in the long term should consider adding a few Canadian blue-chip stocks to their portfolios. This is because these blue-chip stocks are backed by well-established businesses with solid fundamentals, enabling them to consistently deliver profitable growth. Additionally, owing to their growing earnings base, these corporations bolster their shareholders’ returns via stock repurchases and consistent dividend distributions.
Given this context, let’s delve into three blue-chip stocks that, in my opinion, should be part of every Canadian investor’s portfolio.
Enbridge (TSX:ENB) is unquestionably a solid long-term bet. This energy infrastructure company is engaged in the transportation and export of oil and gas. Moreover, it boasts ownership of a regulated natural gas utility business and has a growing portfolio of renewables. Furthermore, Enbridge stock commands a large market cap of around $94 billion.
The company’s diversified revenue base, backed by high-quality conventional and renewable assets, positions Enbridge well to capitalize on the long-term energy demand. Furthermore, long-term contracts, power-purchase agreements, multi-billion-dollar capital plan, and high utilization of assets will enable it to deliver solid earnings and distributable cash flows.
Enbridge’s ability to generate strong distributable cash flows has consistently translated into attractive dividend payouts. For instance, this top dividend-paying company has steadily increased its annual distributions at a compound annual growth rate (CAGR) of 10% over the past 28 years. Furthermore, Enbridge has a remarkable track record of 68 years of dividend payments. In summary, its resilient business model, growing earnings base, focus on enhancing shareholder returns, and an impressive 7.7% yield (calculated based on its closing price of $46.37 on November 6) all support my positive outlook.
Alimentation Couche-Tard (TSX:ATD) is a leading convenience store operator. It also retails fuel and offers electric vehicle charging. Alimentation Couche-Tard stock has appreciated about 586% in the past decade, outperforming the broader markets. This outperformance reflects its ability to generate robust earnings and free cash flow growth. For instance, the retailer’s net earnings increased at a CAGR of 18.4% in the past decade. At the same time, its free cash flows grew at a CAGR of 14.5%.
Besides organic growth, the company’s focus on strategic acquisitions has not only helped it to expand its network but also drove traffic and its financials. During the first quarter (Q1) conference call of fiscal 2024, the company highlighted that it acquired 73 companies since 2004, which has expanded its store base by about 11,000 globally. Alimentation Couche-Tard will actively pursue merger and acquisition opportunities in the coming years, which will likely boost its earnings and expand its network.
To sum it up, Alimentation Couche-Tard is a solid blue-chip stock for investors seeking growth, stability, and income. It has increased its dividend at an impressive CAGR of 26.6% over the past decade and will likely increase its distributions further in the coming years.
Shares of the financial services giant Toronto-Dominion Bank (TSX:TD) could be another great addition to your portfolio. The stock has grown at a CAGR of about 10% in the past decade. Moreover, the bank has enhanced its shareholders’ returns by increasing its dividend steadily.
It’s worth noting that Toronto-Dominion Bank has been dividend for over 166 years. Moreover, its dividend has increased at a CAGR of 11% for over two decades.
In the future, the Toronto-Dominion Bank’s diversified revenue base, focus on improving operating efficiency, and solid balance sheet will support its top and bottom-line growth. In addition, its focus on strategic acquisitions augurs well for growth. Further, the stock offers a lucrative yield of 4.7% (based on its closing price of $81.35 on November 6).
Before you consider Alimentation Couche-Tard, you'll want to hear this.
Our market-beating analyst team just revealed what they believe are the 5 best stocks for investors to buy in October 2023... and Alimentation Couche-Tard wasn't on the list.
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Fool contributor Sneha Nahata has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alimentation Couche-Tard. The Motley Fool recommends Enbridge. The Motley Fool has a disclosure policy.