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Article by Rajiv Nanjapla of Motley Fool Canada
Many working professionals dream of retiring as millionaires. Fortunately, this is not difficult to achieve for disciplined investors who invest consistently. Investing $500 per month and growing at 10% annually for 30 years can build $1.1 million in wealth. With this in mind, let’s take a look at the top 3 Canadian stocks that have the potential to deliver returns of over 10% per year in the long term.
Dollarama
Dollarama (TSX:DOL) is a discount retailer with 1,583 stores across Canada. With strong direct sourcing methods and an efficient logistics network, the company offers a wide variety of consumer goods at attractive prices, growing same-store sales even in a challenging environment. Supported by healthy same-store sales and a growing store network, the company is growing its financials at a healthier pace and generating superior profits. Over the past decade, the company has generated profits of 795%, at an annualized rate of 24.5%.
Dollarama plans to open 60-70 new stores per year and expand its store count to 2,000 by the end of fiscal 2031. Given its capital-efficient, growth-oriented business model, rapid sales growth, and an average payback period of less than two years, these expansion plans are likely to boost sales and profits. The company also holds a 60.1% stake in Dollarcity, which operates 570 discount stores in Latin America. Furthermore, Dollarama could increase its stake by 9.9% by the end of 2027. Meanwhile, Dollarcity plans to add another 480 stores by the end of fiscal 2031. Therefore, Dollarama’s overall growth outlook is healthy and could continue to drive its financials and deliver big gains in the coming years.
Go Easy
goeasy (TSX:GSY) is a Canadian subprime mortgage lender that has seen its revenue and profits grow at an annualized rate of 20.2% and 28.1%, respectively, over the past five years. This solid financial position has helped the company grow its profits at an annualized rate of 28.9% and 256% over the past five years. Despite consistent growth over the past few years, the company has captured only a small percentage of the $218 billion Canadian subprime market, leaving it with significant room to expand.
The story continues
Meanwhile, GoEasy continues to expand its product line, develop new distribution channels, expand into new markets, and strengthen its digital infrastructure, which could keep its loan portfolio growing. The company’s management expects its loan portfolio to grow by about 50% to $6.2 billion by the end of 2026. Moreover, the company is adopting a next-generation credit model and tightening underwriting requirements, which could reduce defaults and improve operating margins. Moreover, the company also offers a quarterly dividend, with a forward yield of 2.6%. Considering all these factors, I am bullish on GoEasy.
Waste Connection
Another stock with the potential to deliver 10%+ returns over the long term is Waste Connections (TSX:WCN), a waste management company that operates in secondary and monopoly markets in Canada and the U.S. The company has expanded its reach and driven its finances through organic growth and strategic acquisitions. Supported by a stable financial position, the company has returned approximately 590% over the past decade, at an annualized rate of 21.3%.
As of July 24, Waste Connections has acquired 18 assets this year and has signed several definitive agreements in the franchise market that the company expects to close during the year. These acquisitions could contribute approximately $650 million to annual revenue. In addition, the company is constructing several renewable natural gas and resource recovery facilities that may be operational in the next few years. Given the company’s solid fundamental business and these healthy growth prospects, Waste Connections is expected to continue to outperform in the coming years.
This article first appeared on The Motley Fool Canada.
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Fool contributor Rajiv Nanjapla does not hold any positions in any stocks mentioned. The Motley Fool has a disclosure policy.
2024
