The strong momentum and advance of materials continues into 2026 and appears poised to become the TSX’s best-performing sector for a second consecutive year. While mining heavyweights continue to take the lead, timber stocks are delivering market-beating returns.
Stella Jones (TSX:SJ), Canfor Corporation (TSX:CFP), and Doman building materials (TSX:DBM) are worth watching right now. These companies provide operating leverage and have maintained their resilience amid continued price volatility and trading restrictions.
Quality choice
Stella-Jones is close to eclipsing its 52-week high of $101.31. At $97.60 per share, the leading timber stock is up nearly 20% over the past three months. Analysts’ high price target is $107. The dividend yield of 1.27% is modest, but safe and sustainable (payout ratio of 19.8%).
The $4.5 billion company produces infrastructure solutions, primarily treated wood products used as railroad ties and utility poles, as well as residential and industrial lumber. It has also been extended to steel structures that support transmission lines.
Stella-Jones has been around for more than 30 years and is benefiting from infrastructure-driven markets. The multi-year demand for electricity pylons and railway sleepers has a strong tailwind, driven by replacement and maintenance. Also maintaining large stocks of treated and untreated wooden cushions against supply disruptions.
Full-year 2025 results are not yet known, although revenue has increased every year for the past 24 years, including 20 consecutive years of dividend increases.
Recovery game
Canfor Corporation produces low-carbon forest products, from construction lumber and high-performance boards to composite beams, pulp, paper and bioproducts. The $1.5 billion company produces high-quality wood products sourced from various locations and operations in Western Canada (19), the Southeastern US (17) and Northern Europe (30).
Lumber stocks are up 19.4% year to date, despite significant operating losses through 2025. Investors are looking ahead and expect lumber prices to recover quickly. In the meantime, diversification and expansion into Europe have the wind at our backs. It will counter high timber taxes in the United States and high timber costs in Canada.
In December 2025, Canfor Corporation entered into an agreement to acquire outstanding shares of common stock (45.2%). Canfor pulp productswhich it does not yet own. According to management, the reason for the transaction is the opportunity for a stronger combined company.
Passive source of income
Doman Building Materials attracts income-oriented investors because of its generous payout. For $10.43 per share (+10.4% year to date), you can participate in the 5.42% dividend offer. Canada’s only fully integrated national distributor, through its subsidiaries, distributes building materials and home renovation products domestically and in the U.S.
The $794 million company’s influence comes from a vast distribution network and a vertical model that allows for better management of the entire supply chain. Expect Doman to benefit from the strong ‘repair and renovation market’ rather than new construction. However, the volatile costs of building materials are impacting sales levels.
In the first three quarters of 2025, revenue and net profit increased 26.6% and 50.9% year-over-year to $2.5 billion and $69.3 million, respectively. Based on the Bank of Canada’s forecast, growth should gradually strengthen in 2026 and 2027, with an annual growth average of 1.4%.
Choose your strategy
TSX timber stocks have kept pace with the dominant mining stocks. You can choose Stella-Jones for defensive growth or Canfor for aggressive wood revival. Doman is an excellent passive income game.
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