TFSA Investors: 4 Top Canadian Stocks to Own in 2021

TFSA investors now is the time to get your money working for you. Here are four of my top TFSA stock recommendations for 2021!

| More on:
IMAGE OF A NOTEBOOK WITH TFSA WRITTEN ON IT

Image source: Getty Images

Tax-Free Savings Account (TFSA) investing is an amazing way for Canadians to build wealth over their lifetime. Contribute your after-tax savings into the account, invest it, earn returns (dividends, interest, and capital gains), pay no tax, and reinvest. It is a long-term formula for building wealth. The great news is the Canada Revenue Agency (CRA) just raised the TFSA contribution limit by an additional $6,000.

When investing in the TFSA, I like to look for companies that have a great business strategy, smart management, a strong balance sheet, and capacity to produce strong stable cash flow growth.

A must-own TFSA stock

Brookfield Asset Management (TSX:BAM-A)(NYSE:BAM) is an absolute must-own TFSA stock. As one of the world’s largest alternative asset managers, BAM has been gaining strong momentum in 2020. Interest rates are at all-time lows and they likely aren’t going up anytime soon — a huge tailwind for BAM.

Right now, there is ample free money (well almost) for BAM to finance new assets and re-finance current assets. Since its assets are largely contracted cash flowing assets, it is able to lock-in very predictable high-yielding cash flow spreads into the future. BAM’s clients, largely pension funds and institutions, cannot earn any returns from bonds.

Rather, its clients must seek alternatives (real estate, infrastructure, power, distressed debt, and insurance) to meet their yield targets. Hence, BAM is seeing a flood of money running to it for management.

BAM is predicting it could see its assets under management and fee-bearing capital double in five years. The company has some of the smartest managers in the world. I have no doubt they can meet or exceed these expectations.

Value to be unlocked

Telus (TSX:T)(NYSE:TU) is another ideal TFSA stock. While I tend not to prefer Canadian telecom stocks, I’m really starting to like Telus. It is more than just its 5% dividend yield. Unlike some peers, it has stayed away from investing in generally costly media businesses. Rather, it has invested heavily to become a leader of digital services in Canada.

Whether it be in telehealth, business services, or even agriculture, Telus is setting up for strong growth in some very attractive, high valuation sectors. Not much of this is factored into the stock price, so that makes it a great buy now!

A cash-flow growth machine

Enghouse Systems (TSX:ENGH) is a more growth-focused TFSA stock. The company had an incredible year with revenues, adjusted EBITDA, and earnings per share growth of 30%, 53%, and 37%, respectively! Yet, based on concerns about its temporary growth outlook, the stock has pulled back. I think it is a great entry point. This company has some great software products that have thrived in the pandemic.

Consequently, it is producing loads of free cash flow right now. It has over $150 million in net cash on the balance sheet. Management is patient and has a history of making very accretive, high value acquisitions. Patient investors will be amply rewarded by holding on to this name.

A TFSA dividend giant

Last, but not least, Enbridge (TSX:ENB)(NYSE:ENB) should be considered for a high-yield income slot in your TFSA. Currently, it pays a whopping 8% dividend! While it operates in a bit of an unloved sector (energy) its business is very resilient. It has very limited commodity-price risk and operates as an essential toll road for the energy industry.

Enbridge is expanding its presence into renewables and gas/hydrogen infrastructure, all of which is highly discounted in the stock price right now. In a normalized world, this stock could do really well, making it one of my top TFSA stock picks for 2021.

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.

More on Stocks for Beginners

A stock price graph showing declines
Dividend Stocks

Here’s Why I’m Confident About Investing Through the Down Market

There is no bear market in history that has not been followed by a bull cycle. Rather than fret over…

Read more »

A bull and bear face off.
Stocks for Beginners

2 TSX Stocks to Buy in a Recession

Are you worried about a recession? Top TSX stocks like Fortis and Dollarama may be perfect investments for a future…

Read more »

edit Close-up Of A Piggybank With Eyeglasses And Calculator On Desk
Stocks for Beginners

How to Turn a $6,000 TFSA or RRSP Into $600,000

You can retire comfortably early if you do some serious retirement planning. Investing regularly in your TFSA and maybe your…

Read more »

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Stocks for Beginners

3 TSX Stocks You’ll Wish You Bought at These Prices

Stocks are currently trading at unbelievable discounts. Here are three TSX stocks you’ll wish you had bought at these prices!

Read more »

funds, money, nest egg
Stocks for Beginners

No Time to Invest? The Easiest Way to Create a Million-Dollar TFSA

Here’s how investors can take advantage of a recent market crash to create a million-dollar TFSA with ease.

Read more »

Volatile market, stock volatility
Bank Stocks

Here’s Why I’m Confident About Investing in a Down Market

This down market continues to trade near 52-week lows, providing you with a small window of time where you can…

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Stocks for Beginners

2 Safe Stocks to Buy for a Bear Market

As the market conditions continue to worsen as we begin the fall, safe stocks, such as these two, are some…

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Stocks for Beginners

3 of the Safest U.S. Stocks Right Now

Are you looking for some safe stocks to weather volatility? Here are some of the safest U.S. stocks to consider…

Read more »