2 Top TSX Stocks to Buy for TFSA Investors

If your resolution for the New Year is to get serious about money and investing, a Tax-Free Savings Account will surely help.

| More on:
TFSA and coins

Image source: Getty Images

If your resolution for the New Year is to get serious about money and investing, a Tax-Free Savings Account (TFSA) will surely help. TFSAs allow Canadians to grow their money tax-free in the long term. While it is called a savings account, it is actually an investment account. For 2022, the TFSA contribution limit has been raised by $6,000. So, the total available limit for TFSA contribution if you have never invested in the TFSA so far will be $81,500.

Conservative investors get around 2-3% on low-risk investments like guaranteed investment certificates. However, TFSAs allow investing in TSX stocks as well, which can earn way higher returns than low-risk investments. Interestingly, dividend income or stock appreciation generated within the TFSA are tax-free throughout the holding period and at the time of withdrawal.  

Here are some of the top TSX stocks that TFSA investors can consider for the long term.

Air Canada

Canada’s biggest passenger carrier, Air Canada (TSX:AC) stock, has been trading weak this year. It has lost more than 12% in 2021 and is trading 62% lower than its pre-pandemic highs. AC stock got upward momentum after it reported better-than-expected Q3 results. However, it soon lost steam on the Omicron fears.

However, if you are a long-term investor, you should think about what could happen to AC stock post-pandemic, probably in the next few years. Air Canada management claimed that it could take three years to return to its 2019 profitability levels amid the pandemic last year.

As the air travel demand gains steam in the next few quarters, the flag carrier will likely increase its revenues and lower the cash burn. It reported $2.1 billion in revenues in Q3 2021 — a massive 178% growth year over year.

Importantly, Air Canada has one of the strongest balance sheets in the industry, which could fund its growth plans post-pandemic. AC stock is currently trading at $20 and looks like a worthwhile investment proposition.

Enbridge

Canada’s top midstream energy stock Enbridge (TSX:ENB)(NYSE:ENB) is another bargain deal for long-term investors. Like Air Canada, Omicron fears have weighed on Enbridge stock lately. Since November, it has fallen 13% and is currently trading at six-month lows.

While ENB stock is trading weak at the moment, this could be an opportunity for bargain hunters. With limited energy pipelines capacity and increasing demand, the value of Enbridge’s existing pipeline infrastructure is growing. It has an unmatchable pipeline infrastructure that earns stable, fixed-fee revenues. Enbridge earns revenues from its long-term contracts and, thus, has relatively stable earnings relative to upstream energy companies.

It pays stable dividends that yield 7% at the moment. Its juicy dividends could compensate to some extent in bearish markets. Importantly, ENB management has guided a 5-7% dividend increase annually through 2024.

Bottom line

Both ENB and AC stocks are currently trading at lows and offer handsome growth potential for the long term. Re-openings and robust economic growth could fuel earnings of these two, unlocking notable value for shareholders.

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.

The Motley Fool recommends Enbridge. Fool contributor Vineet Kulkarni has no position in any of the stocks mentioned.

More on Investing

Nuclear power station cooling tower
Metals and Mining Stocks

If You’d Invested $1,000 in Cameco Stock 5 Years Ago, This Is How Much You’d Have Now

Cameco (TSX:CCO) stock still looks undervalued, despite a 258% rally. Can the uranium miner deliver more capital gains to shareholders?

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
Dividend Stocks

TFSA Magic: Earn Enormous Passive Income That the CRA Can’t Touch

If you're seeking out passive income, with zero taxes involved, then get on board with a TFSA and this portfolio…

Read more »

Man with no money. Businessman holding empty wallet
Dividend Stocks

2 Stocks Under $50 New Investors Can Confidently Buy

There are some great stocks under $50 that every investor needs to know about. Here’s a look at two great…

Read more »

potted green plant grows up in arrow shape
Stocks for Beginners

3 Growth Stocks I’m Buying in April

These three growth stocks are up in the last year, and that is likely to continue on as we keep…

Read more »

clock time
Tech Stocks

Long-Term Investing: 3 Top Canadian Stocks You Can Buy for Under $20 a Share

These three under-$20 stocks offer excellent buying opportunities for long-term investors.

Read more »

Arrowings ascending on a chalkboard
Energy Stocks

Beat the TSX With This Cash-Gushing Dividend Stock

Canadian Natural Resources stock is well set up to beat the TSX as it continues to generate strong cash flows…

Read more »

think thought consider
Dividend Stocks

Down 10.88%: Is ATD Stock a Good Buy After Earnings?

Alimentation Couche-Tard (TSX:ATD) stock might not be the easy buy-case it once was. Here’s a look at what happened.

Read more »

money cash dividends
Dividend Stocks

TFSA Dividend Stocks: Earn $1,200/Year Tax-Free

Canadian stocks like Fortis are a must-have in your portfolio to earn tax-free yields for decades.

Read more »