The Year Ahead: Canadian Stocks With Strong Momentum for 2026

This year was slow for some stocks, but a momentum year for names like Bombardier, Celestica, and all gold stocks. Driving their rally was economic uncertainty and exemptions from US tariffs. If only one knew the momentum drivers at the start of the year, they would have doubled their investment amount in 2025. However, markets are unpredictable. Even famous investors who have made fortunes forecast outcomes to the best of their knowledge and prepare a Plan B if the forecast reverses.

The trick is to invest for the year ahead based on sectors gaining momentum and manage risk by investing in a contrarian stock.

Canadian stocks with strong momentum for 2026

Telus stock

The momentum could pick up in Telus Corporation (TSX:T) after a dividend growth pause and phasing out of the 2% discount on the dividend reinvestment plan (DRIP) stock. Now, Telus reports its payout ratio as 75%, wherein it deducts the amount allocated to DRIP. Since Telus has been issuing treasury shares in DRIP, the cash did not flow out of the company.

If all DRIP shares were to switch to a cash dividend, its payout ratio would be 115% of the free cash flow. The company is looking to reduce its leverage ratio from 3.5 to 3 times and increase its free cash flow by an average annual rate of 10% in the next two years.

The company will now use the  $860 million DRIP amount to buy back shares. This buyback will help Telus improve its earnings per share and stabilize the share price. All these efforts could see some upward momentum in the stock price in 2026. Now is a good time to lock in a 9.5% yield. Even if Telus follows BCE’s footsteps and cuts dividends by 40%, its share price will increase, and you will still have a 5% yield, if not 9.5%.

Descartes Systems

Descartes Systems (TSX:DSG) could see an uptick in momentum as North America recovers from the tariff shocks. Remember the 2018 US-China trade war? Tariffs became a new normal for China, and it diverted its trade to other countries. Then came the pandemic, and the United States adopted a China plus one policy. Descartes benefited from this shift with faster revenue growth and higher profit margins.

The stock recovered 75% between January 2019 and February 2020. History could repeat itself. Descartes is well-prepared to facilitate the shift in the global supply chain. Now is the time to buy the stock and book your seat in the 2026 recovery momentum.

Constellation stock

Constellation Software’s (TSX:CSU) share price dipped to January 2024 levels as the sudden exit of founder Mark Leonard created panic among shareholders. Even though the chief operating officer has taken the helm and ensured nothing will change, the market will take time to absorb the shock. This dip has created a buying opportunity as the company’s business model of reinvesting cash flows to acquire companies with stable cash flows continues the compounding cycle.

Constellation generally focuses on software companies that still use a licensing model. Many thought that the cloud would end the era of licensing software. However, this segment still sees demand, and if not robust growth, you can enjoy regular maintenance cash flow because of its stickiness. At a time when artificial intelligence (AI) is forcing companies to upgrade, there are still some mission-critical applications that will ensure the licensing model stays.

These conventional companies will be available at a deeper discount as technology upgrades. Remember, Constellation is not looking to acquire growing companies that are scaling by leaps and bounds. It is looking to acquire companies that are at the maturity stage. This stock could see a momentum uptick in 2026 as the AI frenzy cools, or as some expect, the AI bubble bursts.

The post The Year Ahead: Canadian Stocks With Strong Momentum for 2026 appeared first on The Motley Fool Canada.

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More reading

• Premier TSX Dividend Stocks for Retirees
• 3 Stocks Retirees Should Absolutely Love
• Where Will Telus Stock Be in 5 Years?
• 3 of the Best Canadian Tech Stocks Out There
• A Dividend Giant I’d Buy Over Telus Stock Right Now

Fool contributor Puja Tayal has no position in any of the stocks mentioned. The Motley Fool recommends Celestica, Constellation Software, Descartes Systems Group, and TELUS. The Motley Fool has a disclosure policy.