These stocks benefit from Canada’s immigration boom

New Canadians were sworn in at ceremonies across the country this past Canada Day in events that combined their citizenship with the celebration of our country’s 157th birthday.

It’s a poignant way to combine personal milestones with national pride. At any given time there are plenty of these ceremonies. The government aimed for 1.5 million immigrants between 2023 and 2025 and has now extended that to 500,000 more people in 2026. In fact, all population growth through 2030 is expected to be via immigration.

For investors this means opportunity. The immigration policy increases demand for essential goods and services that differ in many areas from those of long-time residents or native Canadians. As economist David Rosenberg noted recently, new Canadians don’t book flights to Florida for March Break, nor do they eat out much, or go to the movies. They so need necessities from food and clothing to housing, household goods and furniture.

Here are some sectors and stocks that stand to benefit from heightened levels of immigration. Immigration is not the only reason to put these companies on your radar but is just one more thing to consider in your investment decision.

Banking: Canada big banks are making pitches in 200 languages to newcomers.

Scotiabank (TSX:BNS) has a StartRight program available in several countries and languages. Newcomers apply online for a Canadian bank account which can be activated at a Scotiabank branch when they land.

CIBC (TSX:CM) has an exclusive deal with the Greater Toronto Airport Authority, allowing the bank to offer services to newcomers before they leave the airport. BMO (TSX:BMO) has a strategic relationship with Immigration.ca, which provides immigration services. The collaboration provides access to BMO’s financial tools and banking products. 

 RBC (TSX:RY) and TD Bank (TSX:TD) offer no-fee  banking services for an initial period as an inducement, plus bonuses for savings account deposits.  

Discretionary spending: New Canadians have especially tight budgets and can find a lot of the things they need at Dollarama (TSX:DOL). The shares are up 39% year-to-date at the recent price of $31.40. The dividend increased 30% with the May payment to $0.09 quarterly, the third increase in 3 years, though it yields a modest 0.28%. Dollarama opened 18 opened new stores in the quarter.

Canadian Tire (TSX:CTC.A) has a unique place in Canadian culture. It started as a corner store in 1922 and is a now a multi-billion dollar Canadian retail success story, surviving the US big box onslaught.  It sells everything from car parts and pots and pans to grass seed and lawn furniture. The stores have prime locations and competitive prices.

Groceries:  Consumers are feeling the pinch, sticking to essentials and moving to lower price points. Grocers are responding by expanding their discount brands. Loblaw Cos. Ltd. (TSX:L) already gets about 60% of its sales from its discount stores. It is converting more full-service stores to No Frills and testing a smaller urban No Frills that is one third the size of regular stores. New Canadians tend to gravitate towards urban areas to be close to public transit and jobs. Metro Inc. (TSX: MRU) has a similar strategy to expand its Food Basics and Super C stores.  Empire Co. (TSX:EMP.A) gets 10% of its sales through its FreshCo. discount brand.

Telecom: A cell phone, phone plan and internet connection are vital to stay in touch with friends and family, to look for work and get access to cheap forms of entertainment. This favours BCE Inc. (TSX: BCE), Canada’s largest and most diversified telecom company with its streaming services as well as Telus Corp. (TSX: T) and Rogers Communications Inc (TSX: RCI.B).  At annual meetings last year both Telus and Bell acknowledged a tailwind from new Canadians.

REITS:  Demand for affordable housing is already far greater than supply and immigration is intensifying the shortages. This is a powerful catalyst for real estate investment trusts (REITs) that own apartments and rent multi-family dwellings.

As with telecoms, REITS have had a tough year. As rates ease they should rebound.

CAPREIT (TSX:CAR.UN) is one of Canada’s largest landlords owning interests in apartments, townhomes and manufactured home communities. Its properties are primarily located in and near major urban centres across Canada.

InterRent REIT (TSX: IIP.UN) is an owner of apartments in eastern Canada, primarily in the Greater Toronto Area, Ottawa, and Montreal. It owns and manages 13,000 apartments with an occupancy rate of 96.6%.

Boardwalk REIT (TSX:BEI.UN) is the largest apartment REIT in Alberta and Saskatchewan, with 33,264 apartments. Alberta represents the largest holdings.

To this list you could add utilities such as Hydro One (TSX:H), Emera (TSX:EM) and Canadian Utilities (TSX: CU) who benefit from population growth. Overall, Canada’s immigration goals are adding to the country’s intellectual capital and provide the resources needed for continued growth and prosperity. That’s a long term plus for the economy and something to consider when making your investment decisions.

This article appeared in The Income Investor on July 11, 2024.  For information on how to reprint this article please view this page.