11 of the Best Canadian Stocks to Buy in September 2023 – Loans for Stock in Canada

If you’re looking for some of the best Canadian stocks to buy in 2023, you’ve come to the right article.

And the fact that you’re looking for the top Canadian stocks shows you believe there is value right here at home.

Canadian stocks and the Toronto Stock Exchange, in general, have had a poor reputation in terms of returns. Many investors looking to learn how to buy stocks in Canada skip the Canadian markets and head down south for more growth.

Why? First off, the United State’s economy is significantly larger than ours. And it contains high-flying tech companies like Microsoft (MSFT), Meta Platforms (formerly Facebook) (META), Apple (AAPL), Amazon (AMZN), and Alphabet (GOOG). The S&P 500 and NASDAQ are certainly indexes that are likely to give you higher overall returns over the long term.

But there’s money to be made regarding Canadian stocks and the Canadian stock market, especially in the environment we could be heading into. That is an economic downturn and recession. There will be plenty of headwinds for companies moving forward, and Canadian stocks are set to weather them better than most.

What are the best stocks to buy in Canada for 2023 and beyond?

Lightspeed Commerce (TSE:LSPD)Sunlife Financial (TSE:SLF)Shopify (TSE:SHOP)Telus (TSE:T)Parkland Fuels (TSE:PKI)Goeasy Ltd (TSE:GSY)Dollarama (TSE:DOL)TFI International (TSE:TFII)Loblaw (TSE:L)Canadian Natural Resources (TSE:CNQ)Royal Bank (TSE:RY)

11. Lightspeed Commerce (TSE:LSPD)

Many investors looking at Lightspeed right now will likely see the company trading significantly off highs witnessed during the pandemic and fear operational difficulties. However, Lightspeed has been performing exceptionally well the past year, and although growth is expected to come in a bit slower, valuations seem to have more than compensated for this.

Over 70% of the company’s clients generate less than $500,000 in annual transaction volume. So, you could say that small businesses, particularly those in retail and hospitality, are the lifeblood of this company. However, the company is in a solid position if small businesses were to take a hit in the current environment.

The company has more than $1B in cash and zero debt on the balance sheet, which should allow the company to navigate a potentially harsh economic climate for small businesses.

It is currently trading at a large discount relative to its competitors and the industry averages, and although it’s never guaranteed, once we have a bit more certainty about the economic climate, I could see this one heading back to trade inline or at a premium with the industry.

After growing at a rapid pace during the pandemic, the company is now scaling back and carving out a path to profitability, something investors are prioritizing now that sentiment has certainly shifted.

10. Sunlife Financial (TSE:SLF)

The company is a Canadian Dividend Aristocrat with eight years of dividend growth. I don’t expect this growth to slow anytime soon either, as the company is only paying out around 50% of earnings and 39% of cash flows toward the dividend at the time of writing.

This has allowed the company to grow the dividend at a nearly double-digit pace annually over the last five years. Although lower than its competitor Manulife Financial, it is more consistent, evident by its longer growth streak.

Rising rates are a tailwind for insurers, and the company should be able to operate well in our current environment. Analysts agree as they expect mid to high single-digit earnings and revenue growth in 2023. This certainly isn’t world-beating growth. However, we must remember that Sunlife Financial is a large-cap blue-chip in Canada.

It has historically provided strong, double-digit annualized returns if you had reinvested the dividends over the last decade, along with lower overall volatility.

At only 10 times expected earnings at the time of writing, despite the company trading at a premium to historical averages, I would still view it as attractively valued.

9. Shopify (TSE:SHOP)

The stock is being impacted significantly by the risk of rising interest rates and the downgrading of most high-tech valuations. Moving forward, until we are out of the weeds in terms of a potential recession and reduced consumer spending, valuations are likely to remain low.

I know this may sound crazy as Shopify is off to a meteoric 2023, gaining more than 85% at the time of writing. However, it’s still a long ways away from its 2022 highs because of a tech valuation reset.

Does that mean you’ll regret a purchase of Shopify half a decade down the line? Absolutely not. And that’s exactly why it’s still on this list.

Shopify offers an e-commerce platform primarily to small and medium businesses globally. They operate in two primary segments, subscription solutions and merchant solutions. Subscription solutions allow subscribers (mostly merchants) to conduct business through Shopify’s tools. In contrast, merchant solutions help companies to become more efficient via Shopify Payments, Shopify Shipping, and Shopify Capital.

The company has been persistently labelled “overvalued” by analysts and investors. Still, before its large-scale correction in 2022, it had never disappointed.

Now the company is seeing slowing growth. But this is to be expected as companies emerging from the early-stage growth phase can rarely keep pace with past growth. The company and its CEO Tobi Lutke have been the first to admit they forecasted too much growth in 2022 and beyond due to the pandemic.

The company’s theory was that 5+ years of e-commerce growth would be pulled into 2022, suggesting the pandemic permanently shifted consumer shopping habits. It missed the mark on that projection by a large amount, so the market hammered it on the news. However, it is still one of the fastest-growing companies of its size in North America. It’s just not going to grow at the pace that was originally projected.

Shopify is trading at the cheapest valuation in its history regarding enterprise value to revenue (EV/Revenue), even with its large runup in 2023. The company would still be deemed “expensive” when we look at the general market. But overall, the only cheaper time in history to buy Shopify was during the bear market of 2022.

If you don’t have a quick trigger finger in terms of selling stocks, in my opinion, there will be few investors who are disappointed 5-7 years down the road if they bought Shopify even at these levels. Just be prepared for a lot of bumps in the road.

The company is still growing rapidly and has a large cash balance to reinvest in its business.

8. Telus (TSE:T)

The last five years have not been favourable to Canadian telecoms regarding growth. Telus has only grown revenue by 3.7% annually over the previous five years, and earnings have remained relatively flat.

However, the environment has completely changed for these companies. Telecom infrastructure is difficult to construct and extremely costly. On the one hand, this is a massive benefit to a company like Telus. Unless they’re willing to share towers, it creates an almost impenetrable barrier to entry.

On the other hand, however, it makes developing new infrastructure extremely expensive, and telecom companies often carry a large amount of debt. Case in point, trying to keep pace when it comes to 5G development.

When interest rates are high, we can expect these companies to struggle. However, even as rates increase, they’re still at manageable levels for these companies. Most telecoms will likely scale back capital expenditures due to the rising rates. Still, Telus should be able to continue to fuel growth even in this environment.

Of note, the company’s recent spinoff of Telus International (TSE:TIXT) has caused some turmoil with the stock. Because Telus Communications is the controlling shareholder of Telus International, Telus International revising its guidance downwards is going to have a 10% impact to Telus’s Adjusted EBITDA. 

A stock that once had a large growth premium applied to it has watched that growth premium evaporate because of the hardships of its subsidiaries. However, I’m still very bullish on this stock over the long term.

Analysts feel the same, predicting double-digit earnings growth for Telus and mid to high single-digit revenue growth over the next few years. This is the fastest expected growth rate of all 3 major telecom companies.

The company’s economic moat, pricing power, and it being one of the best Canadian dividend stocks in the country make it a no-brainer on this list.

7. Parkland Fuels (TSE:PKI)

The company also recently entered the frozen food business by purchasing M&M Foods. The acquisition is certainly a new avenue for growth for Parkland. It will be exciting to see how it works out.

Another positive of the company’s acquisition-heavy strategy is that various brands allow it to distribute its products to a wide range of markets across North America.

Prior to the pandemic, Parkland had some outstanding growth. It was one of the fastest-growing mid-cap stocks in the country. But, the pandemic hit the company hard as travel activity collapsed amid shutdowns. It certainly didn’t help its refining business either, as the price of crude oil inevitably collapsed due to the lack of travel.

Despite recoveries from many other players in the industry, like Alimentation Couche-Tard, at the time of writing, Parkland remains significantly below its pre-COVID valuations. The market is having a hard time valuing this company. For long-term investors, it is certainly an attractive proposition. The main thing keeping Parkland Fuel’s share price low is the company’s debt levels. But it has navigated this type of interest rate environment plenty of times.

Considering the company pays a healthy dividend, it would be a mistake for Canadians not to consider this stock or add it to a watchlist. The company is a Canadian Dividend Aristocrat, having raised dividends for nine straight years, making it even more attractive to Canadian investors wanting a steady income stream.

As long as the company can maintain its dividend and remain in a solid position to grow, I’ll be patient during this high rate environment.

6. Goeasy Ltd (TSE:GSY)

It also continually works to increase Canadian borrowers’ credit scores, with 60% of customers improving their credit scores less than 12 months after borrowing.

The company provides loans for a wide variety of products including furniture, electronics, and appliances. Goeasy has become an attractive alternative for Canadians due to strict lending restrictions placed on Canada’s major financial institutions.

A lot of investors view Goeasy’s business model as predatory. If something doesn’t adhere to your principles, don’t invest in it. Much like tobacco or alcohol, some investors aren’t willing to support companies with such products. But you can’t deny that what Goeasy is doing is working, and it’s working well.

Since 2001, Goeasy has grown revenue at a 12%~ compound annual growth rate. The company has never had a year since 2001 where revenue was flat or lower than the year prior. If we look towards recent years, from 2015 to 2020, the company doubled its revenue, and from 2021-2023, although growth has slowed, it is still strong and in the double digits. This confirms the fact that alternative lenders are catching on in a big way.

Even more impressive is the company’s earnings, as net income since 2001 has grown at a pace of 30%~ annually. To grow net income at a compound annual rate of more than 30% over two decades highlights how strong this company has been.

The company is also growing its dividend at one of the fastest rates in the country. The company has a 35% 5-year annual dividend growth rate. It has raised dividends for eight consecutive years, including the most recent increase of 5.5%. This dividend raise surprised a lot of people. However, there are a few explanations for this.

For one, the rules put in place to reduce the maximum allowable interest that company’s like Goeasy can charge their clients. Although this certainly did impact the company, a small portion of its loan book was impacted, and the loans that were above the 35% maximum allowable interest that was put in place were not above by much.

Secondly, the company is simply being prudent in a pretty tough environment. This is a sign of strong management.

Many investors are speaking of impending doom for Canada’s alternative lenders, much like they did during the dot-com bubble and the financial crisis. After both of these catastrophic economic events, Goeasy is still here and is still growing. Overall if you’re looking for a higher growth play in the financial sector, I don’t think there is a better option than goeasy Ltd.

5. Dollarama (TSE:DOL)

The company’s stores are throughout Canada, generally located in convenient locations, such as metropolitan areas, midsize cities, and small towns.

Its broad exposure and cheap product base make it perfect for Canadians looking to pinch pennies during poorer economic climates. And this has undoubtedly been the case this year, as the company is showing no signs of a slowdown, despite many other retailers warning about inventory backlogs and margin impacts.

While many retailers warn of slowing growth, Dollarama is expected to continue its double-digit growth in 2023, even amid recessionary fears. It is not seeing a slowdown in consumer activity. It’s even seeing a higher average basket price than pre-pandemic, suggesting many shoppers are potentially utilizing Dollarama over other stores for essential goods.

Analysts figure the company will grow revenue and earnings at a double-digit clip in both Fiscal 2023 and Fiscal 2024. At the time of writing, the stock is somewhat fully valued in my opinion. However, suppose it continues to perform, and other retailers lag. In that case, Dollarama may get even more interest from potential investors who want a safe-haven retailer during an economic downturn.

4. TFI International (TSE:TFII)

The company has operations in the United States and Canada. Following its recent acquisition of UPS’s Less-Than-Truckload freight business in 2021, the bulk of its revenue, almost 75%, will come from the US.

So why were we extremely bullish on TFI during the pandemic at Stocktrades Premium, and why are we still bullish on them despite the huge price increase in 2022 and 2023?

While mass panic selling was occurring, TFI International’s stock was not immune to the sell-off. The stock quickly plummeted in March 2020, hitting the $24 range. Fast-forward to 2023, and the stock is worth nearly $170 at the time of writing.

With the solid financial position the company was in, it went on the hunt for struggling companies. It ended up purchasing Gusgo Transport, Fleetway Transport, CCC Transportation, APPS Transport, Keith Hall & Sons, assets of CT Transportation, the dry bulk assets of Grammer Logistics, and assets of MCT Transportation, DLS Worldwide, and the aforementioned UPS Freight business.

Yes, it’s a lot. CEO Alain Bedard was very busy putting a solid balance sheet to work. TFI took advantage of the situation and bought assets at discounted rates, highlighting the ability of its management, which looks to have set the company up to outperform for many years to come.

And as synergies from new acquisitions take hold, it will undoubtedly spur growth. The UPS Freight acquisition is transformational for the company. As mentioned, TFI International will now be more weighted towards business in the US, as opposed to the past when most revenues came from Canada.

When TFI International purchased UPS Freight, it was roughly breakeven, with margins of around 1%. Management has stated they will improve margins to 10%, providing a lot of earnings and revenue growth.

In the current economic climate, there is a chance that TFI could benefit from struggling trucking companies yet again. Yellow, a US trucking line and one that received hundreds of millions of dollars in bailouts from the US Government during the pandemic, is close to going bankrupt.

Ultimately, this means more business for TFI and the expectation that freight rates will continue to rise, and ultimately profits.

This growth in profits should allow TFI International to continue growing its dividend. The company has a 12-year dividend growth streak and has raised dividends annually at a 9.9% clip over the last five years.

It doesn’t yield much, hovering around 1% or even sometimes sub-1%. Still, with the dividend payout ratio making up less than 20% of trailing earnings, it should have plenty of room to grow.

Do we fear a recession? Absolutely not. Although it would no doubt impact TFI’s share price, we’d be happy to accumulate shares for cheaper for as long as the market gave us the opportunity.

3. Loblaw (TSE:L)

Essential grocery banners include Loblaw, No Frills, and Maxi. At the same time, its pharmaceutical operations are the product of its 2014 acquisition of Shoppers Drug Mart.

Regardless of the economic circumstances, humans need groceries. Without food and water, we don’t survive. And when times get tough, we tend to pinch pennies. The distinct advantage Loblaw has is the fact it has a much higher “discount” element to it than other grocers like Empire Company and Metro, particularly its No Frills brand. And although they have some intersection in products, another discount retailer like Dollarama is unlikely to take significant market share.

The company also has one of the most significant economic moats of any grocer in the country. 90% of Canadians live within 10KMs of a Loblaw store. This isn’t a flashy company by any stretch of the imagination. It doesn’t boast massive margins or large-scale growth. However, we witnessed during the bear market of 2022 that sometimes reliable cash flow takes priority over surging growth.

It pays dividends, typically in the low to mid 1% range. However, dividend growth is strong, with a decade-plus dividend growth streak and mid-single-digit dividend growth on average over the last five years.

The company is expected to grow earnings in the mid-single-digit range over the next few years and revenue in the low single digits. We see it as a solid consumer defensive option in a volatile market.

2. Canadian Natural Resources (TSE:CNQ)

Look back over the last ten years, and you’ll be hard-pressed to find a better-performing major oil stock than Canadian Natural Resources.

Now, that isn’t to say its performance has necessarily been good, as the oil and gas sector has provided abysmal returns for a very long time. But it’s been the best of a bad bunch. And, now that oil has made a comeback, it could rise from the ashes and become one of the best-performing stocks on the TSX Composite Index.

Canadian Natural is one of the most efficient companies in the industry. With breakeven prices in the $30 WTI range, the company can maintain positive cash flows in almost every environment. Despite oil prices seeing one of the largest collapses in their history in 2020, Canadian Natural still produced over $2.2B in free cash flow in Fiscal 2020.

For this reason, the company was not only able to maintain the dividend in 2020, but while other major producers like Suncor Energy were cutting their payouts, Canadian Natural Resources came through with a dividend raise to extend its multi-decade dividend growth streak.

Canadian Natural and investors stand to benefit if WTI prices can be maintained at the $70~ range over the next 2-3 years. Although the “home run” style price levels are likely long past us, don’t make this the reason you ignore Canadian Natural right now. The company still has upside potential in terms of the share price. 

Still, the most attractive thesis for the company is its dividend and share buybacks. Once its net debt is paid down to $10B, it will return 100% of its free cash flow back to shareholders via dividends and buybacks. This is a very attractive proposition for investors from a company flush with cash.

Cyclical options are not long-term holds. Unless you want to underperform, that is. Many investors in the oil and gas industry know this. And they also know that the industry is not exactly on the up and up. So, for this reason, many investors expect oil companies to return cash flow to investors in the form of a dividend or share buybacks instead of spending cash flow on expansion.

This should result in some hefty dividend increases and share appreciation via buybacks. These two reasons are precisely why Canadian Natural has cracked the top 3 of our best Canadian stocks to buy in 2023 and beyond.

1. Royal Bank of Canada (TSE:RY)

It is also a well-diversified bank with personal, commercial, wealth management, insurance, corporate, and capital market services.

The company has been Canada’s most valuable brand for six plus years. It is also currently the largest bank in the country. It lost its title of Canada’s largest company to Shopify during the tech frenzy in 2020 and 2021. But, as it has done for a very long time, it regained its crown at the start of 2022 with a market capitalization of over $180B.

On average, over the last five years, the company has grown revenue and earnings by mid-single digits. Not bad for the largest company in the country. And with a dividend yield in the 4% range and a 12-year dividend growth streak, RBC is one of the best dividend payers in the country.

The Canadian banking industry is one of the strongest investment sectors in the world, highlighted by the fact that no Big 5 financial institution cut their dividend during the 2008 financial crisis and no Big 5 institution cut during the COVID-19 pandemic.

As soon as regulatory agencies allowed major institutions like the Bank of Montreal, Bank of Nova Scotia, Toronto-Dominion Bank, National Bank of Canada, Canadian Imperial Bank of Commerce, and Royal Bank to raise the dividend, they did so almost immediately.

The financial correction in Canada in 2022 and 2023 was, in our opinion, an overreaction. In volatile markets, we often find strong entry points for some of the best companies in the country. Royal Bank is one of those and could be a solid addition to your portfolio in 2023.