Yahoo Finance Canada's 'super strong' immigration boom could boost these TSX-listed stocks
Canada’s skyrocketing population growth fuelled by record-high levels of immigration has prompted sharp warnings from economists about the housing market becoming even less affordable. But what about the stock market? From dollar store chains, to airlines, and telecom giants, major companies are spelling out plans to capitalize on an influx of new arrivals.
Last year, Canada’s population grew at its fastest rate since 1957. Unlike the post-war Baby Boom, this increase was about 98 per cent driven by international migration, much of it temporary, according to Statistics Canada. Responding to concerns about housing and inflation, Prime Minister Justin Trudeau recently announced plans to curb the number of temporary immigrants. For permanent residents, Ottawa has a target of 485,000 new immigrants this year, rising to 500,000 in both 2025 and 2026.
“That creates a generational structural opportunity for delivering travel to those new entrants, for business, for pleasure, for going back home, visiting family and friends,” Air Canada (AC.TO) chief financial officer John Di Bert told an audience at a Bank of America Securities conference earlier this month. “We have about half a million new Canadian entrants per year, on a 40-million citizen country. That’s not an immaterial number.”
On Dollarama’s (DOL.TO) latest quarterly conference call, CEO Neil Rossy called Canada’s growing population a “driver in the future.” The Montreal-based company sells a wide assortment of discount household essentials like knives, forks, pots and pans through more than 1,500 stores across Canada. BMO Capital Markets estimates nearly a third of Dollarama’s 2025 same-store sales growth will come from “elevated levels of immigration into Canada.”
Meanwhile, executives from Rogers Communications (RCI-B.TO) and Bell owner BCE (BCE.TO) are talking about Canada’s “strong immigration efforts” and “getting the share we deserve.”
Last month, Rogers CEO Tony Staffieri shrugged off the impact of Canada’s two-year cap on the number of international student permits announced by the government in January. He estimates Rogers’ wireless business grew 4.6 per cent in the first quarter of 2024, despite the change.
"Last year, it was over five per cent, which was remarkable," Staffieri told analysts on a post earnings conference call.
He expects the market to grow between four and 4.5 per cent for the remainder of 2024.
"Which continues to be extremely strong growth," Staffieri added. "Half relates to the 'new-to-Canada' category."
David Rosenberg's stock picks for the immigration boom
Economist David Rosenberg weighed in on the link between Canada’s population and stock performance back in 2016. With the S&P/TSX Composite Index (^GSPTSE) heavily weighted towards energy and bank stocks, he says a rising population “isn't something that is going to move the needle.”
Rosenberg gained fame in the 2000s with prescient calls about the U.S. housing market and credit conditions ahead of the global financial crisis. More recently, he admitted to The Globe and Mail newspaper to being “dead wrong” about the trajectory of the hard-charging bull market for U.S. stocks.
He revisited the Canadian population growth theme in an interview with Yahoo Finance Canada.
"There are sectors and stocks that you can certainly point to that benefit from the super strong immigration inflows that we've been seeing," said Rosenberg, founder and president of Rosenberg Research.
“What you want to do is focus on where immigrants spend their money,” he added. “They’re not going to be flying anywhere. They’re not going to be dining out at fancy restaurants. They won’t be going to the movies. Discretionary purchases are not going to come until later on, when they develop a recurring revenue stream."
His Canadian immigration-themed equity portfolio includes Dollarama, and major grocery chains Loblaw (L.TO) and Empire (EMP-A.TO). He also includes Tim Hortons owner Restaurant Brands International (QSR.TO), Canadian Tire (CTC-A.TO), and Sleep Country Canada (ZZZ.TO).
“They’re going to need beds,” Rosenberg said. “They’ll need to eat, but most likely at home.”
Assuming new arrivals to Canada are more likely to rent than own property, he adds the Canadian Apartment Properties Real Estate Investment Trust (CAR-UN.TO), and InterRent Real Estate Investment Trust (IIP-UN.TO). Other stocks include utilities Hydro One (H.TO) and Fortis (FTS.TO), as well as Bell or Rogers. (“Take your pick,” Rosenberg says of the two biggest Canadian telcos.)
In a report last December, the Bank of Canada cautioned against using generalizations to gauge the economic impact of new arrivals to Canada. The Bank also warned that some newcomers have higher initial levels of consumption on arrival, but then settle into lower consumption due to remittance payments to their home country, and saving for house purchases.
Ernest Wong, head of research for Toronto-based Baskin Wealth Management, says population growth has certainly benefited Canadian companies over the last few years.
“Especially those focused on the Greater Toronto Area and Greater Vancouver Area, where most immigrants tend to go,” he told Yahoo Finance Canada. “[However], as the government of Canada slows down the pace of immigration to limit housing inflation, this could be a headwind to economic growth over the next few years.”
Asked if the spate of immigration and population references on company earnings calls could be a ploy by Canadian executives to shore up investor confidence in the face of a slowing economy, Rosenberg put it this way:
“Show me a CEO of a publicly listed company that is not a cheerleader, and I will show you a Toronto Maple Leafs fan who doesn’t say, ‘Next year.’”
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.
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