Although official reports showed Canada’s CPI fell to 1.8% in February, suggesting signs of cooling inflation, the Bank of Canada has recently warned that the oil shock related to the Iran war could make the country’s inflation relief only temporary. Newly released data from the U.S. shows that March CPI jumped to 3.3%, reaching a nearly two-year high.
For Canadian investors seeking steady, long-term returns, now is an opportune moment to reassess the defensive capabilities of their portfolios. Two Toronto Stock Exchange stocks – Dollarama (TSX: DOL) and Canadian National Railway (TSX: CNR) – demonstrate irreplaceable value in an environment of rising inflation, thanks to their unique business resilience.
Dollarama: A “Customer Magnet” Through the Inflation Cycle
Dollarama’s investment thesis is simple yet powerful: when consumers feel their budgets tightening, discount retailers gain favor – and that habit tends to stick. Over the past year, the company acquired Australian discount chain The Reject Shop and continued expanding its Latin American Dollarcity business, giving it growth drivers that no longer rely solely on Canadian consumer confidence.
In the third quarter of fiscal 2026, Dollarama’s sales rose 22% to $1.91 billion, EBITDA climbed to $612 million, and diluted earnings per share increased 19% to $1.17. Same-store sales in Canada rose 6%, and management raised its full-year same-store sales guidance. With a market capitalization of approximately $51.8 billion and a P/E ratio near 40, the stock is not cheap. However, that premium is easier to justify in an inflationary environment – customers who flock to Dollarama when budgets get tight rarely leave even when the economy improves. If inflation continues to climb, Dollarama’s problem isn’t a broken investment thesis; it’s simply more customers.
Canadian National Railway: The “Economic Artery” That Moves Through Inflation
If Dollarama is the defensive choice on the consumer side, then CNR is a cornerstone holding on the infrastructure side. As one of North America’s most important transportation networks, Canadian National Railway moves real goods – grain, potash, oil – demand for which does not disappear during inflationary cycles but rather remains resilient due to continued economic activity.
Over the past year, the company has withstood trade-war pressures on freight volumes, including layoffs and tariff-related revenue headwinds. In the fourth quarter of 2025, revenue rose 2% to $4.46 billion, net income increased 9% to $1.25 billion, and diluted EPS climbed 12% to $2.03. For the full year, revenue reached $17.3 billion and net income came in at $4.7 billion. Management set its 2026 capital program at $2.8 billion, down $500 million from 2025 – demonstrating commendable capital discipline in an uncertain environment.
With a market cap of approximately $84.2 billion and a P/E ratio near 18, CNR is priced far more reasonably than most high-quality Canadian stocks. Its revenue is not tied to consumer sentiment but is deeply connected to the physical movement of goods across the continent.
An Irreplaceable Portfolio Combination
Against the backdrop of potentially resurging inflation, Dollarama and CNR offer two complementary defensive paths: the former directly benefits from consumers’ shift toward value-seeking behavior, while the latter relies on North America’s foundational transportation needs. Together, they build a “moat” capable of weathering the inflationary cycle – one that neither chases hot themes nor depends on guessing macro direction, but instead stands on proven business fundamentals. For investors looking to stop reacting to every inflation data point and instead build a truly durable income-oriented portfolio, these two stocks deserve serious attention.
