10 of the Best Blue Chip Canadian Stocks to Buy in January 2024 - Stocktrades (2024)

When investors think of blue-chip Canadian stocks, they often think of some of the bestCanadian dividend stocks. However, this isn't necessarily the case.

Here is a list of high-quality Canadian blue chip stocks you must look at.

The list is dominated by energy, financial and railroad companies, but this is to be expected as they take up a large majority of the TSX.

Brookfield Corporation is exposed to the real estate, infrastructure, private equity, data centers, and even renewable energy sectors.

But investors can instead purchase a subsidiary of the company like Brookfield Renewable Partners (BEP.UN) to get exposure to its renewable energy assets or Brookfield Infrastructure Partners (BIP.UN) to gain exposure to its utility, transport and energy assets, among others.

And as mentioned, they can now access Brookfield Asset Management under the ticker BAM. So, why buy Brookfield Corporation instead? It yields less and is growing slower than a company like Brookfield Renewable Partners.

The simple answer is that you want exposure to the company's assets. Instead of seeking out a higher yield, you instead want overall returns.

The company's assets are primarily located in the United States and Canada. Still, it does have exposure in both Brazil and Australia as well. With a market cap over $74B, this is one of the largest companies in the country and is undoubtedly worthy of its blue-chip title.

Brookfield is a Canadian staple and has consistently rewarded shareholders with market-beating growth. This is due to outstanding management and operating performance.

They are less susceptible to damage due to fluctuations in the price of oil. One of the best in the industry is TC Energy, despite its recent struggles. The company recently announced that it will spin off a portion of its business and "split" into two separate companies at the midpoint of 2024.

This spin off, along with a discounted valuation, should allow for a pretty attractive entry point for Canadian investors.

The company has critical infrastructure across North America and expects to spend $37 billion on growth projects through 2023. The majority of which will be spent on natural gas pipelines. The natural gas portion should be the faster growing, but likely lower yielding of the two companies post-spin off.

The company aims to grow the dividend in the mid-single digit range. It has set aside a significant amount of capital for expanding infrastructure. This should secure the long-term safety of the dividend.

TC Energy certainly fits the bill if you are looking for a best-in-class energy company. It is trading at cheap valuations, the company's juicy dividend yield is well covered, and it has a robust pipeline of growth projects.

This isn't a blue-chip Canadian stock that will blow you away with outstanding returns. But, it's going to provide a consistently growing passive income stream.

With its operational issues in the rear-view mirror, the railroad has returned to dividend growth.

In July 2020, the company extended its dividend-growth streak to five years, when it raised the dividend by 15%. Why are we looking all the way back to 2020?

It was a significant raise as it reestablished itself as a Canadian Dividend Aristocrat after its operational issues. Now, its dividend growth streak sits at seven years. Throughout the streak, it has consistently raised the dividend by double-digits.

The company's growth has a chance to accelerate, as CP Rail won the Kansas City Southern dispute.

The railways can certainly dip depending on the likelihood of an upcoming recession. However, despite this, analysts figure the company will be able to grow earnings at a double-digit rate well into 2025.

There isn't much not to like about CP Rail. It forms a duopoly with CN Rail, and rail is the primary means of transporting goods across the country. Despite severe economic uncertainty, it is also proving to be a solid defensive stock.

It has a suite of affordable rent portfolios that is proving to be quite resilient.

CAP REIT is also in strong financial shape. It has a debt-to-gross book value below 36% (a rate below 50% is considered strong), one of the lowest in the industry.

Furthermore, the company’s high-2% dividend yield is well covered, accounting for only 65% of funds from operations. Once again, this is in the top tier of TSX-listed REITs.

The company is currently trading at a double-digit discount to its net asset value, and around 18 times funds from operations. In June 2020, the company was added to the S&P/TSX 60 Composite Index, which tracks the most prominent companies by market cap on the TSX Index. It is the only REIT among the Index constituents.

Although it does carry greater risk than most on this list, the risk-to-reward proposition is attractive. Now is the perfect time to start accumulating Canada’s largest residential REIT despite real estate fears.

Its success in this department is reflected in a customer base that exceeds 9 million subscribers.

The company states that 99% of Canadians can access BCE's services, which is an industry leader in coverage. This is why it deserves the title of blue-chip stock over its counterparts, Rogers and Telus.

Don't get us wrong, though; all 3 are outstanding companies. Why?

The Canadian telecom industry is a regulated monopoly. The three big players dominate the industry, and the regulations make this unlikely to change anytime soon.

Canadians pay some of the highest phone and television bills out of all the developed countries, and strict regulations make it nearly impossible for new players to try and penetrate the market.

The one company that was having some success at breaking through is Shaw Communications (TSX:SJR.B). However, they were recently acquired by Rogers.

BCE is one of the best-income stocks in the country, with a dividend yield north of 6.5% and a 14-year dividend growth streak. Although it may seem like a short streak, it was interrupted by an impending purchase by the Ontario Teacher's plan that ultimately fell through.

It would have 20+ years of dividend growth if this didn't happen. With a market capitalization of more than $52B, the company is one of the largest in the country. It is a blue-chip stock that has provided consistency and reliability for over a decade.

Although it may not provide the best growth out of the Big 3, it has the broadest reach across the country. It commands the title of blue-chip Canadian stock when it comes to telecommunications.

The company's low yield may be a turn-off for some, but it is one of the best dividend growth stocks in the country.

Metro's 28-year dividend growth streak is tied for the 7th-longest streak in the country. It is one of the few in the leading 10 to have consistently raised by double-digits over the past three, five, and ten-year periods.

Even in a post-pandemic and post-shutdown environment, it is clear that consumer activity and purchasing habits have changed forever. Metro could likely see less foot traffic through its doors. Still, a higher volume per purchase as consumers have learned over the pandemic to shop more efficiently.

Another habit? E-commerce. And this is a space that Metro is growing in rapidly. The company's online sales are seeing triple-digit year-over-year growth.

This growth is likely to slow a bit in a post-pandemic world, but there is no question that consumer habits have changed. Some will make a permanent shift to e-commerce ordering due to convenience. As a result, we'd still expect significant growth in the company's online sales moving forward.

And finally, in periods of rising inflation, a company like Metro has the chance to outperform. Consumer defensive stocks like Metro tend to outperform pure-growth plays in rising rate & inflationary environments like we are now.

And that isConstellation Software(TSX:CSU). Constellation is one of the best-managed companies on the TSX Index.

Over the past ten years, its stock price has soared by over 1780%, and it has one of the best track records in the industry. It pays an almost non-existent dividend. However, that is intentional, as this company is an acquisition machine and chooses to reinvest cash flow instead.

A $10,000 investment in the company 10 years ago would be worth over $178,000 at the time of writing – and this is without commanding some of the crazy valuations of today’s high-growth tech stocks.

Constellation is, simply put, the best consolidator in the industry. It has a knack for acquiring companies and seamlessly bringing them into the fold. It is also essential to recognize that tech is becoming a defensive play in this new environment.

Despite being a technology stock, the company is performing nearly in line with most major indexes. It is one of the best-performing Canadian technology companies in this tech bear market.

It is, however, a company that requires complete trust in management. It does not hold quarterly conference calls and only provides an annual letter to shareholders. You are putting your trust in management; thus far, it has proven to be a winning proposition.

It also has a high share price, frequently trading in the $2600+ range. This does make it extremely hard for beginner investors with a small portfolio to purchase the stock. It presents a concentration risk if you only have $5,000 or $10,000 to start with.

Fractional shares on a platform like Wealthsimple, or a potential share split, could make Constellation more attractive to those just starting out.

It has a dividend growth streak of 26 years and a five-year dividend growth rate of 12%. However, the stock's consistent rise in price has resulted in a low yield.

Don't fret. The company may lack in yield, but it makes up for that in capital appreciation. Over the past decade, it has returned more than 268% to investors. This type of performance from a large-cap, blue-chip company is quite impressive.

Simply put, CP Rail and CN Rail are some of the best railways in North America, which is why they're both on this list. They're the only sector that features two companies on this list. That is how strong they are.

Before the Kansas City Southern fiasco last year, CN Rail had been performing exceptionally well. And, now that things are settling in terms of that deal, it's starting to get back to its outstanding performance despite recessionary fears and a large-scale correction in the equity markets.

We expect cash flow to be relatively consistent even in a recessionary environment. CN Rail moves a lot of critical material across the country.

Moving on, despite its size, CN Rail has been able to adapt, re-route and focus operations on those customers that ran essential services.

Investors are in good hands with CN Rail, and the short-term negative sentiment due to a potential recession will be short-lived.

Right now, Canada's railways look expensive. However, they've always looked expensive. If you want to add, timing the market on either CN or CP Rail will likely be a wasted effort. Just scoop them up and tuck them into the core holdings of your portfolio.

With a market capitalization of over $176B, Royal Bank is one of the best blue chip stocks to add to your portfolio today.

The company's dividend is strong, with a yield typically in the mid 4% range and a 12 year dividend growth streak. The dividend is also growing at an impressive pace, with a five-year growth rate of over 6%.

The Canadian banking industry is one of the strongest sectors in the country, if not the world. While banks worldwide were slashing dividends and closing their doors during the 2008 financial crisis, all Canadian banks held firm. Although their share prices fell considerably, recovery was quick, and dividends were never cut.

Now that the pandemic is behind us, financial institutions like Toronto Dominion Bank, Bank of Montreal, Bank of Nova Scotia, and RBC have been able to raise their dividends. And they've done just that, despite a looming recession and potential economic uncertainty. This is a testament to how well-capitalized they are.

Royal Bank's international exposure and sheer size were highlighted during the COVID-19 pandemic. It has become one of the more reliable Canadian stocks of the last few years. As such, it's worthy of its blue-chip title.

As the population keeps growing, energy demands will increase, and utility companies are positioned to profit.

Fortis has the second-longest dividend growth streak in the country at 49 years. This proven track record has cemented the company as one of Canada's best investments and worthy of its blue-chip title.

Yielding around 4%, the company has grown the dividend at a 5-year rate of 6.1% with a dividend payout ratio of under 60%. The good news?

Despite rising interest rates, Fortis recently extended its targeted annual dividend growth rate of 6% to 2025. That means investors can expect a 6% yearly raise to the dividend in each of the next three years.

That type of transparency and reliability is rare. It will be interesting to see if this company can hit this guidance with rates increasing as fast as they are.

Utility companies rely heavily on debt to finance capital investments. As such, these companies are prone to setbacks when interest rates rise. You need to keep an eye on this if you're looking to invest in a Canadian blue chip stock like Fortis.

However, even if the BoC were to continue to raise rates, Fortis has historically been impacted the least out of all regulated utilities. Less than 5% of its overall debt is floating rate, meaning 95% of it is fixed at much lower rates for the time being.

With a beta of 0.2, the stock trades more like a bond, and its low volatility will prove vital if a recession hits.

Fortis' stock is as close to a set-and-forget investment as you can get.

What are Canadian blue chip stocks?

Our definition of a blue chip stock has a large market capitalization and is a top company in its industry.

Typically I look for high-quality stocks that are within the top three in terms of performance in the sector, but industries like Canadian banking can have many stocks I consider blue chip even if they aren't a front runner.

Blue chip stocks are often the backbone of an investor's portfolio and are held for the long term. Investors, especially those just learninghow to buy stocks in Canada, should make high-quality blue-chip stocks their primary focus.

They provide long-term stability and usually (but not always, like I stated above) an excellent dividend.

Why is that?

A"blue-chip"stockis often well-established and financially sound for decades. This differs from growth stocks, as an investment in them often depends on the company's growth potential, not its previous results and can have extensive price swings over the long term.

An exciting piece of information before we move on to the best blue chip stocks in Canada, though.

Did you know that the term blue chip, when it comes to the stock market, is derived from the game of poker?

Typically, blue chips held the highest value and as such, were the most important to keep in your stack.