With a correction in the market, now is the time to add a few top-quality TSX stocks to your TFSA portfolio. Also, it’s prudent to buy a few steady dividend-paying stocks to diversify and add stability to your TFSA portfolio. With growth and steady income in the backdrop, let’s look at a mix of three stocks that could generate stellar tax-free returns in the long term.
Shopify
With more than a 59% decline in its stock, Shopify (TSX: SHOP)(NYSE:SHOP) could be a solid addition to your TFSA portfolio at current levels. While the slowdown in growth and macro concerns affecting consumer spending took a toll on Shopify stock, its long-term fundamentals remain intact. Further, Shopify is well positioned to deliver strong financials in the coming years on the back of its growth initiatives.
With the first half of 2022 facing tougher comparisons, this multi-channel commerce platform provider said its 2022 revenue growth could stay lower than 2021. However, its growth could accelerate as the year progresses, reflecting benefits from the commercial initiatives to drive more merchants to its platform. Further, its aggressive investments to expand the addressable market and increase penetration in existing markets augur well for growth.
Overall, the sharp correction in Shopify stock and multiple growth catalysts, including strengthening its fulfillment network, product launches, and expansion of payment solutions to newer markets, provide a solid base for growth. Also, opportunities in social commerce and the addition of high-growth marketing and sales channels will likely support its growth.
Algonquin Power & Utilities
While Shopify offers high growth, shares of Algonquin Power & Utilities (TSX: AQN)(NYSE: AQN) could be a solid addition to your TFSA portfolio for stability and tax-free dividend income. Notably, this power-producing company’s conservative business model, high-quality asset base, and predictable cash flows indicate that it remains relatively resilient to wild market swings and could consistently enhance its shareholders’ returns through increased payouts.
Algonquin Power & Utilities has increased its dividend for 11 years. Further, its dividend has a CAGR of 10% during the same period. Its growing rate base and contractual arrangements will expand its high-quality earnings base and support its stock price and higher dividend payout.
Its strong investment pipeline, expected growth in rate base, and opportunistic acquisitions augur well for growth. Also, its growing renewable capacity should support its growth. It projects 7-9% annual growth in its earnings through 2026, implying that it could consistently deliver higher dividend in the coming years. Its payouts are well protected, while it offers a solid yield of 4.4%.
Cargojet
Cargojet (TSX: CJT) is another top stock to buy at current levels. Its consistent performance, ability to retain top customers, and competitive advantage over peers in the domestic market support its growth and helped it to outperform the broader market averages.
Notably, a moderation in growth on tough comparisons has led to a correction in Cargojet stock. However, I see this decline in Cargojet as a buying opportunity for TFSA investors. Its long-term contracts, minimum volume guarantee, and ability to pass on costs bode well for growth.
Further, its network optimization, expansion of fleet size, next-day delivery capabilities to most Canadian households, and international growth opportunities will likely drive its financials. Moreover, the reacceleration in e-commerce demand is expected to significantly boost its financial and operating performance.
