3 Canadian Stocks Built to Thrive, Even With Higher Interest Rates

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09-07-2025

Written by Amy Legate-Wolfe at The Motley Fool Canada
With interest rates showing no signs of dropping quickly, Canadian investors are rethinking what kinds of stocks make the most sense right now. Growth stocks may still feel pressure, but some companies are actually built to perform well even if rates stay elevated. Three names to consider are Canadian National Railway (TSX:CNR), Loblaw (TSX:L), and Manulife Financial (TSX:MFC). Each one has pricing power, cash flow strength, and a business model that can weather the high-rate environment.
Let's start with Canadian National Railway. It's not glamorous, but it is essential. CN connects Canada's coasts and stretches down into the U.S., moving more than 300 million tons of goods each year. Even with signs of slowing global trade, CN continues to deliver.
In its first quarter of 2025, the Canadian stock reported revenue of $4.4 billion, up 4% from the year before. Operating income rose to $1.61 billion, and diluted earnings per share (EPS) climbed to $1.85, an 8% increase. Those are strong results given the economic uncertainty.
CN has also maintained a low operating ratio at 63.4%, showing how well it controls costs. That kind of discipline matters when borrowing costs are high and every dollar counts. CN is also planning $3.4 billion in capital investment this year, funded by solid cash flow and not by taking on heavy new debt.
Next is Loblaw Companies. It's Canada's largest grocery and pharmacy operator, and in high-rate environments, consumers tend to stay closer to home and spend more carefully. That plays right into Loblaw's strengths. The Canadian stock continues to post reliable growth.
In its latest quarter, revenue rose 4.1% to $14.1 billion. Net earnings available to common shareholders grew by 9.6% to $503 million, and diluted EPS came in at $1.66, up nearly 13%. Loblaw also raised its quarterly dividend by 10%, now paying $0.5643 per share. This marked the fourteenth consecutive year of dividend increases.
The Canadian stock's mix of food, pharmacy, and discount banners keeps it defensive, and that's exactly what many investors want when rates are high. Its scale gives it leverage in pricing and distribution, and its investment in private-label brands helps protect margins.
Then there's Manulife Financial. Unlike other sectors that can be rate-sensitive, insurance firms like Manulife often benefit when rates are higher. The reason is simple: higher rates mean better returns on the large investment portfolios that insurers manage.
Manulife's recent earnings back this up. In its most recent quarter, the Canadian stock posted net income of $2.2 billion and core earnings of $1.7 billion, up from $1.5 billion a year earlier. Its return on equity came in at a strong 14.3%. The Canadian stock also increased its dividend, now paying $0.44 per share quarterly.
With a yield around 4.2%, it's an appealing income play, and management continues to return capital through share buybacks as well. Manulife is focused on growing in Asia, and it has steadily improved its efficiency ratios. It's well-positioned for a longer period of higher rates.
All three of these Canadian stocks share a few key strengths. They are profitable, generate reliable cash flow, and aren't dependent on debt to grow. That makes them less sensitive to higher interest costs. They also operate in sectors that don't suffer as much from borrowing slowdowns. In fact, some of these businesses benefit from the current climate. That gives investors a level of safety without giving up on growth or dividends.
The Bank of Canada may not rush to cut rates, and if that's the case, investors need to be selective. Canadian National, Loblaw, and Manulife offer a strong foundation for a higher-for-longer world. Each one is built to thrive, not just survive, no matter what direction the rates go next.
The post 3 Canadian Stocks Built to Thrive, Even With Higher Interest Rates 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. The Motley Fool has a disclosure policy.
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