TFSA Investors: Up Your Returns With These Overlooked TSX Index Stocks

Overlooked stocks like Algonquin Power & Utilities Corp (TSX:AQN)(NYSE:AQN) can be unexpected TFSA stars

| More on:
Growth from coins

Image source: Getty Images

Do you want to add some much-needed gains to your TFSA with overlooked stocks that have tons of upside?

In this article I’ll be exploring three stocks that could help you do just that.

The TSX index is home to many well-known stocks in industries like cannabis, tech and clothing. However, it’s often the overlooked gems that perform the best over the long run. Although not all of the stocks on this list are necessarily obscure, none of them are media darlings. At the same time, all of them have beaten the TSX average over the past five years.

We can start with one stock that has been quietly making investors wealthy for decades.

Canadian Tire Corp (TSX:CTC.A)

Canadian Tire will be familiar to most Canadians. However, its stock hasn’t been getting a ton of attention in the past few years. Canadian Tire is a long-term market beater, outperforming the TSX over five and 10- year time frames. In the past year, it under performed, but with earnings rising over the past four quarters, the stock is well positioned for a comeback.

To fuel growth, the company is betting big on clothing retailers, which have been doing very well on the TSX in the past few years. It’s also worth mentioning that Canadian Tire pays a dividend that yields about 3%.

Canadian Pacific Railway Ltd (TSX:CP)(NYSE:CP)

Canadian Pacific Railway is almost the definition of an old-school, out-of-fashion company. As a railway company, it brings to mind a time when gold panning and tulip hoarding were major economic activities. But here’s the thing: railways are still as lucrative as they’ve ever been. Despite how old the industry is, rail is still cheaper per unit of goods shipped than trucks or airplanes.

That goes a long way in explaining Canadian Pacific’s excellent fundamentals. Although the company has missed a few quarters, its revenue is growing at 17% year-over-year. The company’s adjusted earnings soared 41% in its most recent quarter, while GAAP earnings slid 43%.

The GAAP earnings slide was attributable to a retroactively-applied U.S. tax law change that resulted in the company getting a major tax refund in 2017. So adjusted earnings are more reliable for the most recent quarter than GAAP.

Algonquin Power & Utilities Corp (TSX:AQN)(NYSE:AQN)

Algonquin Power & Utilities sells power in Ontario, Quebec, New York and New Hampshire. The company has been on a solid run in the markets, rising about 13% over the past 12 months. The company’s solid return was driven by strong earnings growth. In its most recent quarter, Algonquin grew its revenue by 4% and net income by 35% year-over-year. For a utility company, that’s truly meteoric growth.

As if that weren’t enough, the stock pays a dividend that yielded about 4.7% at the time of this writing. It’s hardly the most popular stock in the world, but a solid dividend play by any standard.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Andrew Button has no position in any of the stocks mentioned.

More on Dividend Stocks

A worker uses a double monitor computer screen in an office.
Dividend Stocks

TFSA Investors: 2 Winning Buy-and-Hold Forever Stocks in April 2024

Buy-and-hold stocks are easy enough to find if you limit yourself to dividends, but there are at least a few…

Read more »

worry concern
Dividend Stocks

Telus Stock Is Down to its Pandemic Low of Below $22: How Low Can it Go?

Telus stock is down 37% in two years and is trading near its pandemic low, making investors wonder how low…

Read more »

money cash dividends
Dividend Stocks

Portfolio Payday: 3 TSX Dividend Stocks That Pay Monthly

After adding these three TSX dividend stocks to your portfolio, you can expect to receive attractive monthly income for years…

Read more »

Dividend Stocks

The Top Canadian REITs to Buy in April 2024

REITs with modest amounts of debt, like Killam Apartment REIT (TSX:KMP.UN), can be good investments.

Read more »

Technology
Dividend Stocks

The Smartest Dividend Stocks to Buy With $500 Right Now

Some of the smartest buys investors can make with $500 today are stocks that have upside potential and pay you…

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

2 Dividend Stocks to Buy in April for Safe Passive Income

These TSX Dividend stocks offer more than 5% yield and are reliable bets to generate worry-free passive income.

Read more »

protect, safe, trust
Dividend Stocks

How to Build a Bulletproof Monthly Passive-Income Portfolio With Just $1,000

If you've only got $1,000 on hand, that's fine! Here is how to make a top-notch, passive-income portfolio that could…

Read more »

Senior Couple Walking With Pet Bulldog In Countryside
Dividend Stocks

CPP Insights: The Average Benefit at Age 60 in 2024

The average CPP benefit at age 60 in average is low, but claiming early has many advantages with the right…

Read more »