Canadian Low Yield Stocks Even Retirees Will Like


Discover great Canadian low yield stocks even retirees will like because of their solid growth potential. You’re decades away from retirement? They’re great for you too! None of the usual suspects this time though, no Alimentation Couche-Tard, Canadian National Railway, TFI International. Curious? Keep reading…

Why low yielders?

By selecting the right low yield stocks, you can enjoy both sustained dividend growth that exceeds inflation and capital appreciation. Actually, low yield high growth stocks very often outperform more mature high-yielding stocks in the long run, thus securing your retirement whenever that might be, as explained in Low Yield, High Growth Stocks for your Retirement.

The good news is that there are plenty to choose from, and in different sectors. If you have a retirement portfolio, they complement your income stocks often found in the Utilities, REIT, and Financials sectors and improve your diversification. Growth investors still in their accumulation phase will also reap the benefits. You might also like What makes companies pay a high or low yield?

For each stock I selected below, I tell you why I like the stock, and include a graph showing the stock price evolution over 10 years and the dividend triangle (the revenue, earnings per share (EPS), and dividend payment trend over 10 years). I also highlight some risks the companies face.

For more stock ideas, download our Top Stocks for 2024 booklet.

Metro (MRU.TO) – Consumer Staples 

The smallest, yet fastest growing grocery store in Canada. Metro focuses on the Quebec and Ontario markets where population growth and the economy are quite healthy. Metro has emphasized its private-label brands, which sell for 20% less than original brand products. In a world where price is the main consumer driver, this is a key advantage. Metro is also pushing its online services to gain customers. The grocer is impressive as it increases sales while keeping expenses under control in this high inflation environment. So far, Metro has kept healthy margins, and benefits from higher inflation to boost its sales.

Graphs showing Metro's stock price, revenue, EPS, and dividend evolution for the last 10 years
MRU.TO dividend triangle

Metro also profits from its strong Brunet and Jean-Coutu drugstore network. However, with 71% of its food stores and 82% of its drugstores found in Quebec, there’s limited growth opportunities there; Metro must expand in other provinces where competition is fierce. Finally, Metro could unlock more value by spinning off its real estate properties and Loblaws and Empire did a while back with Choice Properties and Crombie.

Dollarama (DOL.TO) – Consumer Discretionary 

You won’t pay your utility bills with your Dollarama’s dividend yield. Management doesn’t share the wealth with shareholders yet, mainly because it sees so many growth opportunities. By acquiring 51% of Dollarcity, DOL has international growth potential in Latin America. At the same time, DOL continues to enjoy a stable Canadian economy, with over 1500 stores in the country.

With a possible recession looming, Dollarama is definitely a stock to look into. Many Canadians shop at DOL regularly to cut down their expenses. DOL generates high gross margins (44%) on the many private label products (63%) it sells. The company’s growth plan is to open more stores and expand in Latin America.

Although Dollarama dominates in Canada, similar U.S. chains (e.g., Dollar Tree) are eyeing the Canadian market. Latin America shows strong potential but comes with volatility due to occasional political and economic instability. Another problem is pressure on margins due to inflation making harder to sell inexpensive items, even with large volumes. So far, DOL’s proven highly resilient and shows a strong dividend triangle.

Graphs showing Dollarama's stock price, revenue, EPS, and dividend evolution for the last 10 years
DOL.TO dividend triangle: constant upwards trend

Toromont Industries (TIH.TO) – Industrials 

If you want to make a play on infrastructure spending, Toromont is a good candidate. Toromont is one of Caterpillar’s largest dealerships in Canada. TIH covers industries from roadbuilding to mining and telecommunications to food and beverage processing. In addition to relying on mining (20%) and construction (38%) to grow organically, TIH also buys smaller dealerships, such as Hewitt (acquired in 2017). Revenue growth wasn’t impressive since the pandemic, but has picked up in the recent quarters.

Graphs showing Toromont Industries stock price, revenue, EPS, and dividend evolution for the last 10 years
TIH.TO – Revenue growing again, strong earnings growth, steady dividend increases

TIH continues to face construction delays and inflationary pressure. Its mining and construction customers have cyclical and capital-intensive businesses that are sensitive to high interest rates and a slowing economy. A recession would cause weaker results.

Considering the massive infrastructure spending needs in Canada in the coming years though, Toromont could do very well. Want to know more about Toromont Industries, check out our Buy List Stock of the month article.

For more stock ideas, download our Top Stocks for 2024 booklet.

Waste Connections (WCN.TO) – Industrials 

An integrated solid waste services company, WCN provides non-hazardous waste collection, transfer and disposal services, and resource recovery through recycling and renewable fuels generation. So long as we consume stuff, demand will be high for WCN services. Waste Connections is a classic “I like this business, but it’s too expensive” play.

The company shows an impeccable dividend triangle as it continues to grow by acquisition. Management has been adept in integrating their acquisitions. Therefore, it’s not only growing, but becoming more profitable.

Graphs showing Waste Connections's stock price, revenue, EPS, and dividend evolution for the last 10 years
WCN.TO: strong dividend triangle

EQ Bank (EQB.TO) – Financials 

EQB supplies diversified banking services through its EQ Bank platform and has two divisions: Personal Banking and Commercial Banking. Its non-conventional business (including online presence and reverse mortgage products), along with its aggressive dividend growth policy, made EQB popular among investors. The innovative bank shows impressive growth across all loan products and deposits over the past 5 years.

EQB built a fast-growing business while being surrounded by giants. This small fish in a big pond is going for quickness, simplicity, and seamless digital banking. Let’s just admit the big six are decades behind in that regard. While I’m a big fan of National Bank, I must admit that EQB shows quite the record in the past few years.

Graphs showing EQ Bank's stock price, revenue, EPS, and dividend evolution for the last 10 years
EQB.TO small player finding a lot of growth in Canadian banking

EQB has a very strong dividend triangle but keep in mind that higher interest rates have a lagging impact on the economy. Make sure it just doesn’t look good on Prom night; review quarterly results to detect growth slowdowns or higher provisions for credit losses.

Final Thoughts

As a dividend growth investor, I prefer low yield high growth stocks. Retirees often hesitate to buy such stocks for various reasons, some explained in Why Ignore Low Yield Stocks when Planning Retirement? I believe that income-seeking investors benefit immensely by having a balance in their portfolio between low yield high growth stocks and more traditional retirement high yield stocks.






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