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Use Your Tax Refund to Buy These 2 Forever Stocks

Anxious to get their hands on that sweet refund cash, millions of Canadians have already filed their taxes. If all of your investments are in RRSPs or TFSAs, tax time is pretty simple anyway. You get a T4 and you’re on your way. Besides, that money is yours anyway. I’d be chomping at the bit to get it back too.

Unfortunately, many Canadians take their tax refunds and spend them on something foolish. I’m not opposed to fun gadgets and holidays in the sun, as long as you have your financial house in order first.

Depending on your tax bracket, maxing out your RRSP is of the utmost importance, because then you’ll maximize your tax refund. By reinvesting your tax refund each year, you’ll really supercharge growth. It’s the kind of virtuous cycle that can make you wealthy by 65.

So, once you get that cheque back from Revenue Canada, don’t squander the opportunity. Use your windfall to buy positions in some of Canada’s best companies. Here are a couple that I think are a good place to start.

Restaurant Brands International

Did you know that even after coffee has spiked in popularity over the last decade, North Americans still only drink half as much as we did in 1946? This is due primarily to the rise in demand from soda. As time goes on and we get more concerned about the long-term effects of soda, this should bode well for Canada’s undisputed coffee king, Restaurant Brands International Inc (TSX:QSR)(NYSE:QSR).

That isn’t the only reason why Canadian investors should buy the new combination of Tim Hortons and Burger King. Both chains have potential for growth, with Burger King being underrepresented in Canada, and Tim Hortons contained to a handful of states close to Canada. The combined might of the two companies should help grow store counts.

There are also potential synergy opportunities. Adding Tim Hortons coffee to Burger King’s menu is practically a given, and it’s likely one or two doughnut or cookie items will make it into Burger King’s repertoire as well. This will help test the waters for a possible Tim Hortons expansion into other markets like Latin America, Europe, or Asia.

Plus, billionaire investor Warren Buffett likes the stock as well. He helped finance the deal to bring the two companies together, and promptly exercised his option to buy a bunch of common shares as soon as he could. Buffett likes that the business is simple, and that Tim Hortons has a dominant position in Canada’s coffee market.

Toronto-Dominion Bank

It’s rare you’ll hear an investor regret paying a premium price to snag the best company in the sector. Although Canada’s banks are all great stocks, Toronto-Dominion Bank (TSX:TD)(NYSE:TD) just might be the best of them all.

It starts with TD’s Canadian business. The company has surpassed Royal Bank of Canada as Canada’s largest lender, as well as holding dominant positions in credit cards and wealth management. The company also pioneered advances like opening branches on the weekends, which helped to solidify its grasp on the retail market.

Where TD really shines is with its U.S. operations. Not only is the U.S. side of the business becoming more attractive all the time because of exchange rates and the strong economy down south, but it’s also a much more interesting growth area. There are hundreds of banks jockeying for position in the U.S., while Canada is dominated by the Big Five. TD has the footprint in the U.S., now all it needs to do is keep taking market share away from the smaller players. Approximately 25% of 2014’s profits came from the U.S., and the company projects steady growth there for many years to come.

Plus, TD pays a great dividend. The company’s current yield is 3.8%, which beats the pants off a government bond or GIC. That dividend also comes with the remarkable record of 12% annualized growth over the last 20 years. There’s no guarantee the company can keep that up, but I wouldn’t bet against it.

Three more top stocks for your income tax refund!

It isn't just Restaurant Brands International and TD Bank that would look good in your portfolio. We have three more stocks that are terrific businesses ran by some really smart people.

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Fool contributor Nelson Smith has no position in any stocks mentioned.

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