The Top 3 TFSA Stocks to Buy for 2021

TFSA stocks like Brookfield Property Partners (TSX:BPY.UN)(NYSE:BPY) could stage a recovery in 2021.

| More on:
analyze data

Image source: Getty Images

The biggest mistake most investors make is keeping their Tax-Free Savings Account (TFSA) in cash. The TFSA could be your most important tool to create wealth if you utilize it instead of keeping it in an asset that earns 0% return. 

Here are the top three TFSA stocks you should consider as we enter the new year. 

TFSA stock one

Convenience store chain Alimentation Couche-Tard (TSX:ATD.A)(TSX:ATD.B) is one of my favourite TFSA stocks. That’s because the business model is simple and poised for recovery in 2021. Couche-Tard owns convenience stores at gas stations across the world, which should see an increase in traffic as the economy recovers next year. 

Meanwhile, the company has also been preparing for a future where gasoline is obsolete. In Europe, it has rolled out electric charging stations. This roll-out could go global, as electric vehicles replace traditional modes of transport. Couche-Tard also owns a stake in a retail cannabis brand that could enhance its convenience store offering.

Meanwhile, the stock is severely underpriced. It’s trading at just 14 times earnings per share and 25 times leverage-adjusted cash flow. The dividend-payout ratio is just 8%, which means the company retains most of its earnings to expand the business. The stock is up roughly 900% over the past five years and could deliver similar returns over the next five. 

TFSA stock two

Brookfield Property Partners (TSX:BPY.UN)(NYSE:BPY) is my favourite contrarian TFSA stock for 2021. The company owns and manages commercial properties across the world. This sector has been at the epicentre of the health crisis we now face. 

With malls, offices and event venues abandoned for months, Brookfield’s cash flow has suffered greatly. Meanwhile, the value of these commercial property holdings could decline in the near term. However, Brookfield stock has already priced in all this bad news. 

The stock is currently trading for 26% less than book value per share. Earlier this year, the discount was as high as 70%. Now, the stock still offers a 8.7% dividend yield. The fact that Brookfield has raised capital this year and is backed by the world’s largest asset manager makes this dividend relatively secure. 

In 2021, footfall in Brookfield’s properties could gradually recover. This recovery should ultimately be reflected in the stock price. Investors willing to make a long-term, contrarian bet in their TFSA should keep an eye on this iconic stock. 

TFSA stock three

Fortis (TSX:FTS)(NYSE:FTS) is my final TFSA stock for investors who want a secure long-term bet. Fortis is the unmitigated champion of steady dividend growth. It has bumped up dividends every year for the past 46 years. Next year, despite the crisis, it could do the same. 

That’s because Fortis supplies an essential service: electricity. The business is pretty much recession-proof. In fact, as commercial activity rebounds in 2021, Fortis could see sales and profits jump temporarily. 

Since the company is well positioned to generate cash flows for decades, it could serve as the cornerstone of your TFSA retirement plan. 

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 Vishesh Raisinghani owns shares of ALIMENTATION COUCHE-TARD INC. The Motley Fool recommends ALIMENTATION COUCHE-TARD INC, Brookfield Property Partners LP, and FORTIS INC.

More on Investing

Shopping for consumer goods

Why Shopify Stock Fell 4% in September

Shopify (TSX:SHOP)(NYSE:SHOP) stock is doing its best to keep growing amid rising macro headwinds.

Read more »

edit Business accounting concept, Business man using calculator with computer laptop, budget and loan paper in office.

3 TSX Stocks I’d Buy This Week

Are you struggling to find stocks to add to your portfolio this week? Here are my three top picks!

Read more »

Target. Stand out from the crowd
Dividend Stocks

3 Oversold Stocks to Buy for Passive Income

These three oversold stocks aren't just great right now for high passive income, but provide exposure to high-growth industries.

Read more »


3 Stocks to Hold in Your TFSA for Easy Tax-Free Income

Telco stocks like BCE Inc (TSX:BCE) offer high dividend income -- especially when held in a TFSA!

Read more »

Hand arranging wood block stacking as step stair with arrow up.

Why Shawcor (TSX:SCL) Stock Jumped 9% in September

Shawcor Ltd. (TSX:SCL) stock has rallied off big gains after announcing that big changes may be ahead over the next…

Read more »

Mature financial advisor showing report to young couple for their investment
Bank Stocks

Retire Young: How to Turn a TFSA or RRSP Into $1 Million

Here’s how you can turn your TSFA or RRSP into $1 million or more to plan your early retirement.

Read more »

A person holds a small glass jar of marijuana.
Cannabis Stocks

Cannabis Stocks Jump: What Investors Need to Know

Cannabis stocks have started to recover in recent weeks, showing there might be signs that now is the time to…

Read more »

money cash dividends
Dividend Stocks

TFSA Passive Income: Invest $30,000 to Earn $500,000 + $7,800 in Tax-Free Dividends

Make the power of compounding work for you and turn a $30,000 investment into $500,000 in the next 20 years.

Read more »