The Canadian equity markets have enjoyed upward momentum this month amid solid quarterly earnings and easing recession fears. However, the fear of steep rate hikes in this inflationary environment has been putting pressure on the markets over the last two days. If you are a long-term investor, you need not worry about these short-term fluctuations if you go long on quality stocks. Here are my three top picks that you can add to your TFSA (tax-free savings account) right now.
Waste Connections
Waste Connections (TSX: WCN)(NYSE: WCN), a solid waste management company, is trading 7.5% higher this year. The solid waste collector has comfortably outperformed the TSX/S&P Composite Index, which is down over 5%. Higher E&P (exploration and production) activities and accelerated solid waste pricing allowed the company to overcome inflationary pressure to post strong Q2 2022 performance. During the quarter, revenue grew by 18.4%, while adjusted EBITDA (earnings before interest, tax, depreciation, and amortization), a measure of operational efficiency, increased by 16.9%.
Meanwhile, Waste Connections has accelerated its acquisition activities. As of August 1, the company had closed acquisitions that could increase its annualized revenue by US$470 million. It has also signed several definitive agreements, which could boost its annualized revenue by US$225 million.
Supported by its acquisitions and pricing strength, the company has raised its 2022 guidance. Management increased its revenue guidance by 3.6% to US$7.1 billion while increasing its adjusted EBITDA by over 2% to US$2.2 billion. Further, management expects its revenue in 2023 to grow in double digits. The company has also raised its dividends at a CAGR (compounded annual growth rate) of 15% for the last 12 years. So, given its solid financials, impressive outlook, and dividend growth, I am bullish on Waste Connections.
BCE
The telecommunication sector could witness solid growth over the next few years amid digitization and growth in remote working and learning. The advent of 5G has created long-term growth potential for telecommunication service providers, including BCE (TSX: BCE)(NYSE: BCE). To meet the growing demand, the company added 110,761 mobile phone subscriptions in the June-ending quarter, while its average revenue per user increased by 3.8%. Its postpaid churn rate was at 0.75%, its best quarterly performance.
Supported by its solid operating performance, the BCEâs revenue and adjusted EBITDA increased by 7.8% and 8.3%, respectively. The next evolution of 5G has begun, with the company launching mobile 5G+ services in Toronto and parts of Southern Ontario. Meanwhile, the national telecom expects to provide the service to over 40% of Canadians by this year’s end. BCE’s high-speed broadband offerings and improving media revenue could support its growth in the coming quarters.
The company has raised its dividend by over 5% yearly for the last 14 years. The dividend yield for the next 12 months stands at an attractive 5.57%. So, BCE would be a valuable addition to your TFSA.
Cargojet
My final pick would be Cargojet (TSX: CJT), which has returned approximately 215% over the last five years. Its solid financials and growth in e-commerce business have driven its stock price higher. The company has a 3-year EBITDA growth rate of 30.5% and expanding profit margins of 22%, slightly above the industry average. However, amid the recent pullback, CJT trades at a 32% discount from its 52-week highs while its NTM (next 12 months) price-to-earnings multiple stands at a juicy 20.2.
