Key Takeaways:
- The Canadian equity market has extended its upward momentum, with the S&P/TSX Composite Index gaining 3.2% this year.
- Despite rising geopolitical tensions and uncertainty, certain stocks can make excellent additions to a well-diversified portfolio.
- Dollarama, Extendicare, and Hydro One are three top Canadian stocks to consider buying with $2,000 in 2026.
- These stocks offer a combination of growth prospects, stable cash flows, and attractive valuations, making them compelling buying opportunities at current levels.
Introduction to the Canadian Equity Market
The Canadian equity market has continued its upward momentum in 2026, with the S&P/TSX Composite Index gaining 3.2%. However, rising geopolitical tensions and renewed uncertainty have raised concerns about the global outlook. In this uncertain environment, it is essential to identify stocks that can provide stable and predictable returns. Dollarama, Extendicare, and Hydro One are three top Canadian stocks that can make excellent additions to a well-diversified portfolio.
Dollarama: A Leading Discount Retailer
Dollarama is a leading discount retailer operating 1,684 stores in Canada and 401 in Australia. The company’s superior direct sourcing model and streamlined logistics enable it to keep operating costs low while offering a wide range of consumer products at attractive price points. This value-driven model supports strong customer traffic regardless of broader macroeconomic conditions. Dollarama is also expanding its footprint, with plans to increase its Canadian store count to 2,200 by fiscal 2034 and its Australian network to 700 stores. Additionally, Dollarama owns a 60.1% stake in Dollarcity, which operates 683 stores across Latin America and is pursuing an aggressive expansion strategy.
Extendicare: A Provider of Senior Care and Services
Extendicare is a provider of senior care and services across Canada, with a broad range of services offered through several well-established brands. The company has delivered strong shareholder returns of approximately 118% over the past 12 months, supported by solid quarterly performance and continued acquisition-led growth. Looking ahead, demographic tailwinds from Canada’s aging population could drive sustained demand for Extendicare’s services. The company continues to expand its footprint, with its subsidiary ParaMed acquiring CBI Home Health, a provider of comprehensive home health care services operating across seven Canadian provinces.
Hydro One: A Pure-Play Electricity Transmission and Distribution Company
Hydro One is a pure-play electricity transmission and distribution company with no exposure to power generation or commodity price fluctuations. Approximately 99% of its business is rate-regulated, providing stable and predictable cash flows and insulating its financial performance from market volatility. Supported by this structure, Hydro One has grown its rate base at a compound annual rate of 5.1% since 2017, driving steady earnings and share price growth. The company has outlined a $11.8 billion capital investment plan to expand its asset base, which could increase its rate base at an annualized rate of approximately 6% to $32.1 billion by 2027.
Conclusion and Recommendation
In conclusion, Dollarama, Extendicare, and Hydro One are three top Canadian stocks that can make excellent additions to a well-diversified portfolio. These stocks offer a combination of growth prospects, stable cash flows, and attractive valuations, making them compelling buying opportunities at current levels. With a forward dividend yield of 2.5% and a reasonable forward price-to-earnings multiple of 24.4, Hydro One appears to be an ideal buy at current levels. Similarly, Extendicare’s attractive forward price-to-sales multiple of 1 and monthly dividend of $0.042 per share make it a compelling buying opportunity. Dollarama’s multiple growth drivers across Canada, Australia, and Latin America also make it an attractive buying opportunity at current levels.
