1 Canadian ETF Alternative: A Stock Portfolio in 3 Picks

A broad-market exchange-traded fund (ETF) can make investing simple. It spreads money across dozens, hundreds, or even thousands of companies, which helps lower risk. But some investors want more control. They want to know exactly what they own and why they own it. That’s where a small stock portfolio can work as an ETF alternative. The catch is concentration. Three stocks can’t offer the same protection as a full ETF. So the strongest setup may be a focused basket of top Canadian stocks, with an ETF added on the side for balance.

CNQ

Canadian Natural Resources (TSX:CNQ) could anchor that basket. The company is one of Canada’s largest oil and gas producers, with operations across Western Canada, the North Sea, and offshore Africa. Canadian Natural has increased its dividend for 26 straight years, with a 20% compound annual growth rate over that period. That’s a huge number in a cyclical sector. It tells investors management has treated the dividend as a serious long-term priority, even through oil crashes and recessions.

The latest results show the scale of the business. In the first quarter of 2026, production reached about 1.6 million barrels of oil equivalent per day. Adjusted net earnings came in at $2.4 billion, or $1.17 per share. Adjusted funds flow reached $4.4 billion, or $2.10 per share. The company returned about $1.5 billion to shareholders during the quarter, including $1.2 billion in dividends and $300 million in share buybacks.

That makes CNQ a strong first pick for this mini portfolio. It offers energy exposure, dividend growth, and massive cash generation. The quarterly dividend now sits at $0.625 per share. Of course, the risk is clear. Oil prices can drop quickly, and energy stocks can fall hard when sentiment turns. That’s why CNQ works best as one pillar, not the whole plan.

TD

Toronto-Dominion Bank (TSX:TD) gives the portfolio a very different type of exposure. TD stock is one of Canada’s largest banks, with Canadian banking, U.S. banking, wealth management, insurance, and wholesale banking operations. TD stock also has a recovery angle. The bank has dealt with pressure from U.S. anti-money-laundering issues and growth restrictions, which hurt sentiment around the stock. That sounds uncomfortable, but it may also create opportunity if the bank repairs trust and rebuilds momentum.

The latest quarter showed why TD stock still deserves attention. In the first quarter of 2026, net income reached $4 billion, up from $2.8 billion a year earlier. Adjusted net income came in at $4.2 billion, compared with $3.6 billion. Adjusted diluted earnings per share (EPS) hit $2.44, up from $2.02. Wholesale Banking stood out, with record adjusted net income of $561 million and record revenue of $2.5 billion, up 24% year over year.

TD stock still carries risk. U.S. regulatory pressure, credit losses, and slower loan growth could weigh on results. Yet the stock gives this portfolio a blue-chip financial core. It also brings dividend income and potential upside if investors warm back up to the bank’s turnaround story.

CN

Canadian National Railway (TSX:CNR) rounds out the portfolio with infrastructure. CN operates one of North America’s largest rail networks, moving freight across Canada and into the United States. It carries grain, potash, intermodal containers, forest products, metals, energy products, autos, and consumer goods.

In the first quarter of 2026, revenue came in at $4.4 billion, down 1% year over year. Net income was $1.1 billion, also down 1%. Diluted EPS rose 1% to $1.87, while adjusted diluted EPS fell 3% to $1.80. The standout number was free cash flow, which climbed 44% to $900 million.

CNR adds balance because railways have hard-to-replicate assets and long-term pricing power. The risk is that freight volumes can weaken if the economy slows, and costs can pressure margins. Still, CN gives this mini portfolio a defensive industrial backbone.

Bottom line

A three-stock portfolio won’t replace a broad ETF perfectly. Together, these create a useful Canadian portfolio with value, dividends, and long-term growth potential. Add a broad ETF beside it, and the plan gets even stronger.

The post 1 Canadian ETF Alternative: A Stock Portfolio in 3 Picks appeared first on The Motley Fool Canada.

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Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends Canadian National Railway and Canadian Natural Resources. The Motley Fool has a disclosure policy.