Best Stocks In Canada: By Market Capitalization

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Dividend Earner

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5 min read Affiliate Disclosure

There are a lot of stocks, ETFs, and mutual funds trading in Canada. It can be overwhelming to find what to buy.

When it comes to investing in individual companies by buying their stocks, or shares, there is an easy approach to buying the best Canadian stocks.

You start with filtering the stocks by market capitalization. It’s the best approach as it allows you to navigate risks from the least amount of risks to the highest amount of risk. While potential investment returns are often correlated to risks, it’s not always the case.

Let me show you what the best 5 stocks by market capitalization are based on the following market capitalization grouping. You can read more details on what market cap means to risk in a more detailed post.

wdt_ID Market Cap Tier Value Range
1 Mega Cap > $200B
2 Large Cap $10B - $200B
3 Mid Cap $2B - $10B
4 Small Cap $300M - $2B
5 Micro Cap $50M - $300M
7 Nano Cap < $50M

  • Mega Cap: These companies dominate their industry and often have very little competition. Their challenges are often around becoming too much of a monopoly and regulators stepping in.
  • Large Cap: These companies are very mature and usually have a moat. There is competition but it is limited to a small number of companies.
  • Mid Cap: These companies have grown and are focused on dominating their business. At this level, you get a higher level of safety compared to the smaller companies.
  • Small Cap: These companies are in the growth business life cycle and have potential to grow more or be acquired. There are still risks and your money could go sideways at times but you could have higher returns.
  • Micro Cap: These companie have usually struggle to grow at the expected pace. Still in the start-up phase to some extent working to get in the growth phase. There is potential but it's also risky.
  • Nano Cap: These companies fall into the penny stocks category. These companies have the highest risk with the potential for some high reward.

Methodology for picking the Best Stocks in Canada

The approach here is towards stability of the business with good total return. This is not about building a dividend income portfolio but about total returns. The best Canadian dividend stocks are found through other criteria.

The retirement portfolio is another option for a long lasting dividend income portfolio. The model portfolio is build exclusively with large cap stocks as an example. My portfolio has 13 stocks today and all of them are large cap stocks.

The goal of showing the best 5 stock by market cap is to help understand what exists in each group as each group comes with an investment risk. It will help show how to balance your risk vs return strategy.

One caveat to the selection process is that I will exclude oil & gas stocks as well as mining stocks. The companies are too impacted by commodity prices unfortunately to have enough stability.

Below is a table that will show you at a high level the composition of the stocks on the TSX.

wdt_ID Market Cap Stocks Dividend Stocks Ratio
2 Mega Cap 0 0 0.00
3 Large Cap 71 66 92.30
4 Mid Cap 152 111 73.02
5 Small Cap 252 146 57.93
7 Micro Cap 223 65 29.14
8 Nano Cap 143 18 12.59

The ratio of dividend paying stocks vs non-dividend paying stocks is shown and an important part of the risk factor as the ability to pay a dividend consistenlty implies revenue stability.

The ability to grow the dividend annually, shows not only the ability to have consistent and stable revenue but also a growing revenue.

Did you see the pattern on the number of stocks paying a dividend? The larger the company is, the more they tend to pay a dividend.

Note that you need access to specialized dividend data to screen dividend stocks. You should consider a screener such as Dividend Snaspshot Screeners.

Best 5 Canadian Mega Cap Stocks

There are no mega cap stocks in Canada. While I hold many of them in my portfolio, they are all U.S. mega cap stocks.

They are also my best performing stocks. If you aren’t ready to deal with the currency exchange, feel free to buy the best S&P 500 ETF with VFV

Another option is the NASDAQ 100 with XQQ but know that 90% of the NASDAQ 100 is included in the S&P500.

Best 5 Canadian Large Cap Stocks

This group has most of the TSX blue-chip stocks that tend to have an oligopoly. These Canadian stocks are more stable but with moderate growth generally.

Out of the five picks below, only one has a good dividend yield for a dividend focused investor. The other picks are really focused on dividend growth. None have a dividend yield above 4% but they have excellent dividend growth.

CNR BAM ATD IFC NA

1. Canadian National Railway

Canadian National Railway is a leading transportation and logistics company in North America. The company owns the only transcontinental railway line in North America and provides intermodal, trucking, freight forwarding, warehousing and distribution services.

As North America’s leading supply chain player, Canadian National Railway carries more than 300 million tons of cargo annually. It is a fully integrated rail and transportation services company and is the top mover of aluminum, iron ore and base metal ore in North America.

Canadian National handles over 50% of all Canadian chemicals production and services the three major petrochemical centers in North America. Its product portfolio is well diversified with intermodal accounting for 25% of revenues, followed by petroleum & chemicals, and grains & fertilizers each at 17%. Forest products, metal, minerals, automotives, etc. constitute the remainder.

Key Investment Data

  • Ticker: TSE:cnr
  • Sector: Industrials
  • Industry: Railroads
  • Market Cap: 108.39B
  • Market Cap Group: Large Cap
  • P/E: 21.61
  • Dividend Yield: 1.97%

2. Brookfield Asset Management

Brookfield Asset Management is a leading global alternative asset management company focusing on real estate, infrastructure, renewable energy as well as private equity. The firm serves institutional and retail clients through its four partnerships. It operates through Brookfield Property Partners, Brookfield Infrastructure Partners, Brookfield Renewable Partners, and Brookfield Business Partners.

Infrastructure investments account for the largest portion of investments at 45%, followed by real estate (20%), private equity (20%) and renewable power (~15%). Over 85% of its revenues are long term.

Brookfield Asset Management has a large global presence in over 30 countries which grants it a competitive edge for proprietary deal flow. Brookfield Asset Management invests in North America (86% of funds deployed), Europe (8%), South America (5%) and Asia (1%).

Key Investment Data

  • Ticker: TSE:bam
  • Sector: Financial Services
  • Industry: Asset Management
  • Market Cap: 18.61B
  • Market Cap Group: Large Cap
  • P/E: 0.00
  • Dividend Yield: 1.24%

3. Alimentation Couche-Tard

Alimentation Couche-Tard is one of the largest Canadian companies and the owner of several Canadian convenience stores. The company also supplies road transportation fuel to approximately 1,300 locations in the U.S. and offers stationary energy and aviation fuel.

As a leading independent convenience store operator, Couche-Tard owns a network of nearly 10,000 convenience stores in 48 states in the U.S., ten provinces in Canada, as well as other countries.

It operates more than 16,000 stores worldwide. By geography, the US is its largest market accounting for 67% of 2018 revenues, followed by Europe (20%) and Canada (13%). The company operates through Couche-Tard and Mac’s brands in Canada and Circle K globally.

Key Investment Data

  • Ticker: TSE:atd
  • Sector: Consumer Defensive
  • Industry: Grocery Stores
  • Market Cap: 60.16B
  • Market Cap Group: Large Cap
  • P/E: 16.18
  • Dividend Yield: 0.93%

4. Intact Financial

Intact Financial Corporation is the largest provider of property and casualty insurance in Canada and a leading provider of specialty insurance in North America. The company’s popularity can be gauged from the fact that about one in every five Canadians is a customer of Intact Financial products and services.

The company enjoys a 17% share in the P&C insurance market in Canada. In terms of business segments, personal and auto accounts for nearly 40% of DPW (direct premium written), followed by personal property (20%), commercial lines Canada (25%) and commercial lines USA (15%).

About 85% of the company’s revenue is derived from Canada and the remaining 15% is from the U.S. The company operates through Intact insurance, BrokerLink, OneBeacon and Belairdirect banners.

Key Investment Data

  • Ticker: TSE:ifc
  • Sector: Financial Services
  • Industry: Insurance - Property & Casualty
  • Market Cap: 34.19B
  • Market Cap Group: Large Cap
  • P/E: 12.95
  • Dividend Yield: 2.05%

5. National Bank

With an experience of more than 150 years, National Bank is one of the six largest commercial banks in Canada. The bank enjoys leading market share in Quebec which accounts for 58% of its total revenues.

The bank also has a presence in international markets like the US, Europe and other countries. National Bank’s operating units include personal and commercial banking accounting for more than 40% of its income, followed by financial markets (29%), wealth management (20%), and US specialty finance and international (9%).

National Bank offers a wide spectrum of banking and financial products and services, including corporate and investment banking, securities brokerage, insurance, wealth and retirement management. National Bank’s personal and commercial banking segment has a strong presence in central Canada.

Key Investment Data

  • Ticker: TSE:na
  • Sector: Financial Services
  • Industry: Banks - Diversified
  • Market Cap: 34.04B
  • Market Cap Group: Large Cap
  • P/E: 10.50
  • Dividend Yield: 3.84%

Why not BCE or ENB? 

It’s because they are not growth stocks. They strive as income stocks and not as long term investments to build wealth. While you may feel safe with those stocks in your portfolio, you leave money on the table unless you leverage covered calls for more income.

While they have a juicy yield that is attractive for many investors (newbies and retirees alike), those stocks do provide stability but over the years, it’s mostly about the compounded growth of the dividends.

The first graph shows poor stock price appreciation over 5 years while the second graph shows the impact of the dividend reinvested.

BCE ENB 1
Price movement only over 5 years.
BCE ENB Dividend Adjusted
Performance adjusted for dividends.

Why not SHOP? 

I would have included it a while back but today, I am not sure about its growth vector on the business front. The pandemic provided a boost due to behavioral change but is that a sustainable growth?

Why not the big 5 banks?

Let’s be clear, most Canadians own the big 5 banks. Be it through a fund, an index ETF, or by holding one or more individually but not all of them perform the same.

The best Canadian banks are TD and RY, while the others attempt at growth outside of Canada with little success.

In some cases, HCAL might be better than any individual banks. HCAL is based on an active investment strategy that rebalances quarterly based on the underperforming banks.

What about other blue chip stocks?

Many of the other blue chip stocks in this category can have a place in your portfolio. Based on your goals for growth, or income, and your diversification approach, you should be able to find options.

Best 5 Canadian Mid Cap Stocks

This market cap segment is where you find up and coming future large cap stocks. Alimentation Couche-Tard, and Intact Financial were once part of this group.

1. Summit Industrial Income REIT

Summit Industrial Income REIT is an open-ended mutual fund real estate investment trust focused on growing and managing a portfolio of light industrial properties across Canada. Their mission is to provide best-in-class properties and services to their tenants and solid, stable, and secure investment returns to their unitholders.

Summit Industrial’s internal growth strategy will focus on rental rate optimization, tenant retention and a focused capital expenditure program such that properties remain functional and competitive within their respective geographic markets. While the industrial sector is the largest commercial real estate asset class in Canada, it remains highly fragmented with a high degree of non-institutional ownership. This creates an opportunity for industry consolidation that should provide Summit with future acquisition opportunities in major industrial markets.

They intend to acquire a broad range of industrial product types and spaces in different markets to maximize diversification within their portfolio. This will provide their tenants with optimal spatial choices within their portfolio that will, in turn, promote tenant retention. To complement their acquisition strategy, selective development and expansion opportunities will be undertaken based on tenant demand. These projects will be aimed at improving the overall age and quality of their portfolio, while generating strong returns on investment.

Key Investment Data

  • Ticker: TSE:smu.un
  • Sector: Real Estate
  • Industry: REIT - Industrial
  • Market Cap: 4.34B
  • Market Cap Group: Mid Cap
  • P/E: 8.62
  • Dividend Yield: 0.00%

2. Capital Power Corporation

Capital Power is a leading power producer in North America, engaging in the development, acquisition, and operation of power generation facilities. The company owns approximately 5,100 MW of power generation capacity at 25 facilities.

Capital Power owns natural gas (55% of its portfolio), coal (27%) and renewable energy (18%) assets which are either merchant/ commercial/ contracted facilities or in construction. Its fleet of assets has an average age of 15 years with significant long lives.

The company also has a strong renewable pipeline including 1,200 MW of wind development in the U.S. Capital Power is focusing on Alberta for merchant power generation and pursuing contracted generation capacity throughout North America with nearly 900 MW of owned generation capacity being in advanced development in Alberta and Illinois.

Key Investment Data

  • Ticker: TSE:cpx
  • Sector: Utilities
  • Industry: Utilities - Independent Power Producers
  • Market Cap: 5.12B
  • Market Cap Group: Mid Cap
  • P/E: 40.56
  • Dividend Yield: 5.30%

3. Equitable Group

Equitable Group Inc. is a leading financial services provider in Canada. It operates through its wholly owned subsidiary, Equitable Bank, which is the ninth largest Schedule I bank, and a Challenger Bank in Canada. The bank offers a wide range of residential and commercial lending and savings solutions to its wide range of clients including self borrowers, commercial real estate investors, and newcomers to Canada.

Equitable operates through a network of independent mortgage brokers and other business partners across Canada. The bank serves its clients from coast to coast through its branchless banking model and customer first approach. The bank’s operations can be organized into single family lending services, commercial lending services, securitization financing, EQ Bank and brokered deposits. Equitable Bank has approximately $27.5 billion in assets under management.

The bank has been diversifying into adjacent business such as reverse mortgages and cash surrender value LoC through its commercial lending platform, since 2018.

Key Investment Data

  • Ticker: TSE:eqb
  • Sector: Financial Services
  • Industry: Mortgage Finance
  • Market Cap: 2.51B
  • Market Cap Group: Mid Cap
  • P/E: 7.70
  • Dividend Yield: 1.97%

4. FirstService Corp

FirstService Corporation is a leading real estate services company in North America. The company is the largest manager of residential communities and a leading provider of essential property services to residential and commercial customers.

FirstService deals in various property types ranging from Condominiums / Cooperatives, Homeowner Associations, Master-planned to Active adult / Life-style, and High-rise, mid-rise, townhouse, single-family home.

The company has a portfolio of more than 8,500 properties including 3,200 high-rise condos. It operates through FirstService Residential (accounting for 52% of TTM revenues) and FirstService Brands (~48%). Each of FirstService's businesses is the #1 or #2 player in their respective markets.

Key Investment Data

  • Ticker: TSE:fsv
  • Sector: Real Estate
  • Industry: Real Estate Services
  • Market Cap: 8.60B
  • Market Cap Group: Mid Cap
  • P/E: 57.13
  • Dividend Yield: 0.56%

5. Stantec

Stantec is a top global design and consulting firm ranking third in North America and tenth globally. The company provides varied professional services ranging from architecture, environmental, and community development to oil & gas, power engineering, and water & waste management engineering.

From humble beginnings in 1954, Stantec today has a huge geographic presence extending to 400 locations in six continents. By revenues, the U.S. is its largest market accounting for 54% of total sales, followed by Canada (30%) and other global markets (16%).

Stantec primarily earns revenues from consulting services under fee-for-service agreements. It serves a wide range of markets such as civic, educational, industrial, health, mining, power, transportation, oil & gas, water, etc.

Key Investment Data

  • Ticker: TSE:stn
  • Sector: Industrials
  • Industry: Engineering & Construction
  • Market Cap: 7.89B
  • Market Cap Group: Mid Cap
  • P/E: 41.64
  • Dividend Yield: 1.01%

Why not CJT?

The stock was really challenged during the early Covid-19 pandemic. It’s not enough of a consistent business and climate change might put pressure on them.

I’d like to pick stocks my kids could own for 30 years and I don’t think it’s one of them.

Best 5 Canadian Small Cap Stocks

This group of stocks is interesting as this is where most of the REITs are. Yet, I am not a fan of REITs as you may have read.

Let’s be clear about this category, these are small cap stocks and therefore have more risks than large cap stocks. I cannot say that the risk vs reward is worth it with this group of stocks.

Best 5 Canadian Micro Cap Stocks

This group of companies are either target for acquisition or growing by expending.

However, this is also a risky investment group. It should represent a small part of your portfolio. When risk is discussed, equity is often highlighted as the highest risk, but you should see now the difference between a large cap stock and a micro cap stock.

33% of the stocks in this group have no 5 year return yet, while another 33% have a negative return over the last 5 years. That leaves only another 33% with a positive return to select from.

While I was hoping to see candidates I would consider, I could not settle on any stock with any degree of confidence.

Best Canadian Nano Cap Stocks

We are going to skip this market cap group as technically this is now entering the high speculation area of investing.

That’s a much different investment strategy.

My Portfolio By Market Cap

I have build a portfolio that delivers around 12% annualized returns (a.k.a. Annual ROR) and I have made my fair share of mistakes along the way.

My leanings have been to keep it simple. Canada doesn’t have a lot of great options in the end. Canada has a TSX 60 while the US has the S&P 500 for example. The numbers just show you how many great companies you can find.

Don’t forget about your income tax. You don’t want to realize too late that you need to change your investment strategy for better tax efficiency. There is a way to be tax efficient in Canada.

Build Your OWN Top List

My portfolio is generating over 12% annual returns since 2009. It's not from the beginning of the year or from 2019, it's from 2009 !!! That's a consistent return which means using the rule of 72, I double my portfolio every 6 years.

My approach is simple but you need key data that I have cultivated with the Dividend Snapshot Screeners. No other investment services provide you with easy to understand data but also actionable data. No hidden magic.

In fact, I have tried all of the investment services for dividend investors like a crash test dummy of investment services. Just ask me, and you'll learn why there was nothing I could use out there and build the Dividend Snapshot Screeners.