The 3 Industrial Stocks That Keep Canada’s Economy Going

Three industrial stocks with solid fundamentals are safer options in the current market environment and should add stability to your portfolio.

| More on:
Canadian energy stocks are rising with oil prices

A bear market looms due to recent events, including bank failures outside Canada and falling oil prices. As the TSX continues to flip-flop, many investors want to shift to defensive mode and add stability to their stock portfolios. If you need to make such a move, three industrial stocks are safer options.

Canadian Pacific Railway (TSX:CP), Waste Connections (TSX:WCN), and Russel Metals (TSX:RUS) are outperforming, notwithstanding the challenging environment. The respective businesses thrive and will thrive some more in the years to come.

A pipedream to reality      

Canadian Pacific Railway got the green light to build the only single-line rail network connecting Canada, the United States, and Mexico. The US Surface Transportation Board (STB) has approved the merger of the $101.7 billion railroad company and Kansas City Southern (KCS).

The US STB saw several benefits in this historic combination that should drive economic growth. Besides an increase in rail network investments, the merger will create jobs and stimulate or enhance competition. Under the setup, Canadian Pacific will exercise control over KCS beginning on April 14, 2023.

However, a seven-year oversight period should ensure that the newly formed CPKS mitigates environmental impacts. The parties must also preserve competition, protect railroad workers, and promote efficient passenger rail. The stock trades at $106.14 per share (+5.03% year to date) and pays a modest but super-safe 0,72% dividend.

Stable investment

A large-cap stock and industry leader like Waste Connections is a solid investment come hell or high water. The $48.2 billion company provides dumpster rentals and waste management services. It serves eight million residential, commercial, and industrial customers in Canada (six provinces) and the U.S. (43 states). 

Management said 2022 was an extraordinary year because of strong operational execution and over 10% solid waste pricing. For 2023, Waste Connections projects revenue and net income growth of 30.8% and 55.3% to $8.05 billion and $618.5 million, respectively, versus last year.

The industrial stock isn’t a high-flyer but a steady performer. At $184.62 per share, investors enjoy a +3.08% year-to-date gain and a sustainable 0.75% dividend. WCN’s total return in 3 years is 66.6%, which translates to a compound annual growth rate of 18.5%.

Top performer

Russel Metals is one of the industrial sector’s top performers in 2023. At $33.62 per share, the year-to-date gain is a fantastic 18.1%. Moreover, if you invest today, you can partake in the attractive 4.49% dividend. RUS is a high-growth stock, owing to the 160.2% return in three years (40% CAGR).

The $2.1 billion company distributes metals in North America and generates revenue from business segments such as metals service centres, energy field stores, and steel distributors. Stable steel prices and modest price increases in key products helped Russel in late Q4 2022.

Management expects the favourable trend to continue or extend over the near term. Market analysts are bullish despite the 14% decline in net earnings to $371.9 million in 2022 versus 2021. Their 12-month average price target is $40.17 (+19.5%).    

Solid fundamentals

Thus far, in 2023, the industrial sector (4.8%) is the second-best performer after technology (+16.7%). While the headwinds are violent lately, Canadian Pacific Railway, Waste Connections, and Russel Metals have solid fundamentals to overcome them.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool recommends Canadian Pacific Railway and Russel Metals. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Train cars pass over trestle bridge in the mountains
Dividend Stocks

Is CNR Stock a Buy, Sell, or Hold for 2025?

Can CNR stock continue its long-term outperformance into 2025 and beyond? Let's explore whether now is a good time to…

Read more »

coins jump into piggy bank
Dividend Stocks

The Smartest Dividend Stocks to Buy With $500 Right Now

These top dividend stocks both offer attractive yields and trade off their highs, making them two of the best to…

Read more »

Middle aged man drinks coffee
Dividend Stocks

Here’s the Average TFSA Balance at Age 35 in Canada

At age 35, it might not seem like you need to be thinking about your future cash flow. But ideally,…

Read more »

ETF stands for Exchange Traded Fund
Dividend Stocks

How to Invest Your $7,000 TFSA Contribution in 2024

Here's how I would prioritize a $7,000 TFSA contribution for growth and income.

Read more »

a man relaxes with his feet on a pile of books
Dividend Stocks

CPP Pensioners: Watch for These Important Updates

The CPP is an excellent tool for retirees, but be sure to stay on top of important updates like these.

Read more »

Technology
Dividend Stocks

TFSA Investors: 3 Dividend Stocks I’d Buy and Hold Forever

These TSX dividend stocks are likely to help TFSA investors earn steady and growing passive income for decades.

Read more »

four people hold happy emoji masks
Dividend Stocks

Love Dividend Growth? Check Out These 2 Income-Boosting Stocks

National Bank of Canada (TSX:NA) and another Canadian dividend-growth stock are looking like a bargain going into December 2024.

Read more »

An investor uses a tablet
Dividend Stocks

A Dividend Giant I’d Buy Over Enbridge Stock Right Now

Enbridge stock may seem like the best of the best in terms of dividends, but honestly this one is far…

Read more »