The Tax-Free Savings Account (TFSA) contribution room expands within a few weeks. From January, 2021, you may add another $6,000 to this delightfully convenient tax shelter. Here are the top three stocks you can buy with your newly expanded TFSA room.
TFSA growth stock
If you’re younger and don’t need a steady flow of cash, investing for the long term is probably the best strategy. A solid growth stock that can deliver stunning capital appreciation would be a perfect fit for your TFSA contribution room in 2021.
Learning management software provider Docebo (TSX: DCBO)(NASDAQ: DCBO) is a top bet. The firm provides a cloud-based platform that allows any enterprise to create educational content. This could be used to create training videos for new employees, tests for interviews, or apps for customer engagement.
Digital tools like Docebo are rapidly replacing old-school slides and presentations across the corporate world. This year, with everyone working remotely, Docebo’s traction has accelerated. The platform is now used by the likes of Walmart, Amazon Web Services, and Uber.
Currently worth $2 billion, the stock could deliver multifold returns over the next few years.
TFSA dividend stock
Telecom giant Telus (TSX: T)(NYSE: TU) is always my top pick for a robust dividend stock. Telus offers a 4.85% dividend yield at its current price. That means a $6,000 investment in your TFSA could generate $300 in annual income tax-free!
While there are stocks that offer higher yields than Telus, I believe this company’s payout is safer. Next year, plenty of real estate investment trusts and energy stocks could face turmoil as the economy languishes. The demand for wireless data and broadband, however, should remain steady for the foreseeable future.
Year to date, Telus stock is flat, which means it preserved shareholder value, despite the pandemic. Now, as the economy reopens, new businesses are launched, and new immigrants arrive, Telus could see user and sales growth.
TFSA dividend-growth stock
If you’re looking for a TFSA stock that balances income and growth, Fortis (TSX: FTS)(NYSE: FTS) could be ideal. The utility giant has delivered 46 consecutive dividend increases and has several more planned for the years ahead.
The fact that demand for electricity doesn’t dip during recessions is a key reason why Fortis has maintained its dividend this year too. Meanwhile, its payout ratio is always conservative. The payout is 76% at the moment, which means there’s plenty of room for the company to boost its dividend or reinvest for growth in the years ahead.
A $6,000 investment in Fortis within a few weeks could generate $228 in annual tax-free cash flow. That’s far better than what you’d expect from a “high-interest” savings account.
Bottom line
The TFSA contribution room expands in a few weeks. Investors can add another $6,000 to their accounts to deploy into any asset class. I believe a growth stock like Docebo, dividend stock like Telus, or dividend growth stock like Fortis could all be great bets.
