After the strong rallies seen in gold stocks and some industrial names in 2025, investors are turning their attention to the new year, seeking targets that can sustain their growth momentum.
Against this backdrop, three Canadian stocks—Telus Corporation (TSX:T), Descartes Systems (TSX:DSG), and Constellation Software (TSX:CSU)—are demonstrating growth potential likely to extend into 2026, thanks to their hard-to-replicate advantages within their respective fields and key factors that mitigate downside risk.
Telus: Dual Momentum from Financial Restructuring and Shareholder Returns
As one of Canada’s telecom giants, Telus’s recent stock price stagnation stands in stark contrast to its high dividend yield of 9.5%. However, this is precisely the starting point for its future momentum shift. The company’s core strategy is undergoing critical adjustments, which constitute its unique advantage.
The company announced a pause in dividend growth and the phased elimination of the discount on its Dividend Reinvestment Plan (DRIP). The underlying intent is to redirect approximately $860 million originally supporting the DRIP towards share buybacks.
This shift is significant: buybacks can directly boost earnings per share and signal management’s confidence that the stock is undervalued. Simultaneously, Telus is committed to reducing its leverage ratio from 3.5x to 3x over the next two years and increasing its free cash flow by an average annual rate of 10%. This series of measures aims to fundamentally improve the financial health and provide solid support for the share price.
Even if the market is concerned about the sustainability of its dividend (the adjusted payout ratio is currently 115%), the high yield itself provides strong downside protection. Analysis suggests that even if it follows its peers in adjusting the dividend, the adjusted yield could remain at a respectable level. More importantly, the company’s clear goals of reducing leverage and growing cash flow outline a clear path to value repair for investors, effectively limiting excessive panic selling based on financial concerns.
Descartes Systems: The “Invisible Hub” in Global Supply Chain Reshaping
Against the backdrop of ongoing geopolitical and trade policy reshaping global supply chains, Descartes Systems, as a leader in global logistics and supply chain management software, draws its momentum from irreversible macro trends.
Between 2018 and 2020, the company’s stock price rose 75% due to supply chain reorganization amid the US-China trade war. Currently, the further regionalization and diversification of North American supply chains are bringing a new wave of demand, reminiscent of history repeating itself. Its cloud-based global logistics network platform helps businesses achieve visibility, compliance, and efficiency optimization in complex trade environments. This “mission-critical” service makes it a necessity rather than an option for companies adjusting their supply chains.
Importantly, Descartes Systems’ Software-as-a-Service (SaaS) model boasts high gross margins and strong customer stickiness. Once a business embeds its core logistics processes into this platform, the switching costs are very high. This provides the company with predictable recurring revenue and allows it to demonstrate strong defensiveness during economic fluctuations. Its business growth does not rely on capital expenditure cycles but is positively correlated with the complexity of its customers’ trade activities, providing a stability foundation for the stock price.
Constellation Software: The “Value Hunter” and Compounding Machine That Transcends Cycles
Amid AI frenzy sparking widespread valuation concerns for tech stocks, Constellation Software presents a rare buying opportunity due to its counter-cyclical business model and recent price pullback.
Unlike chasing high-growth, high-loss star SaaS companies, Constellation Software specializes in acquiring mature, profitable vertical market software companies that use the classic perpetual licensing model. This software is often “mission-critical” within customers’ business processes. While growth may be modest, it generates extremely stable and enduring maintenance cash flow. The company achieves long-term capital compounding by consolidating this cash flow and continuously making new acquisitions.
The recent stock price pullback to early-2024 levels, following the sudden departure of founder Mark Leonard, has largely released sentiment-driven risks. The new CEO’s commitment to continuing the established strategy has eliminated the biggest uncertainty. More importantly, its business model of acquiring and holding cash-flow-stable companies itself demonstrates defensive value during economic downturns or tech bubble bursts. Market concerns about an AI bubble may prompt capital to re-examine this “traditional” tech business model with its certainty and sustained cash-generating ability, thus providing support for the stock price.
Overall, Telus, Descartes Systems, and Constellation Software represent three different growth momentum logics: value repair, trend beneficiary, and business model moat. What they share is that their advantages do not rely on short-term market hype but are based on company-specific strategic adjustments, irreversible industry trends, or time-tested business models.
Entering 2026, these intrinsic factors are expected to continue playing a role. Although the overall market is difficult to predict, investing in these individual stocks with clear unique advantages and downside protection factors undoubtedly provides a more resilient approach to navigating uncertainty. For investors seeking to capture sustained opportunities amid sector rotation, these three Canadian stocks are worth focusing on.
