If you want to build long-term wealth, investing through your Tax-Free Savings Account (TFSA) needs to be a part of your formula. The TFSA is the only CRA (Canada Revenue Agency) registered account that offers tax-free advantages while you invest and when you withdraw from the account. That means all investment income earned stays with you.
As of January 1, 2023, Canadian investors will be able to add $6,500 of new contributions to their TFSA. That will allow for the total contribution of $88,000 for tax-free investing for those who were 18 or older upon its inception in 2009!
While you might need some patience and an iron stomach in these current markets, I have three bargain-priced stock picks that could be useful for building long-term TFSA wealth.
goeasy: A high-growth stock for a long-term TFSA
One TFSA stock that is interesting for growth, income, and value is goeasy (TSX:GSY). Many people may not know this stock. However, over the past 10 years, it has delivered an astounding 1,339% total return! That is even after the stock has pulled back 41% in 2022.
goeasy is specialty lender that caters to the non-prime market. Many banks have exited this lending segment, so goeasy has been able to consolidate market share across Canada. Last quarter, it grew loan originations to a record $641 million. Likewise, revenues and adjusted earnings per share grew by 19.3% and 9.3%, respectively.
At $105 per share, this TFSA stock trades with a 3.5% dividend yield and a forward price-to-earnings (P/E) ratio of 7.9. Given the current uncertain economic environment, this stock is somewhat higher risk. However, it could have good upside if a recession is short-lived.
Granite REIT: Solid as a rock
Granite REIT (TSX:GRT.UN) may not be a high-growth stock like goeasy. However, if you want a solid, dividend payer with a track record of +10% annualized returns, this is a good bet for your TFSA. With a market cap of $4.5 billion, Granite is Canada’s largest public real estate investment trust (REIT) with a focus on industrial and logistics properties.
Granite stock is down 33% in 2022. Unfortunately, that masks the fact that the REIT has had an exceptional year. Its funds from operation (FFO) per unit should rise by over 10%. Granite’s high-quality portfolio continues to benefit from trends like e-commerce, just-in-case inventory, and near-shoring.
Today, this TFSA stock trades at a 20% discount to its appraised market value. It has an attractive 4.5% dividend that it has consistently grown for 12 years. If you want a high-quality business at a cheap price, this is a great stock to hold for years in your TFSA.
Colliers International: A cheap compounder for any TFSA
If you can be patient with a long investment horizon, Colliers International Group (TSX:CIGI) is the perfect stock to buy and hold in a TFSA. Colliers is well known as one of the foremost commercial real estate brokerage firms in the world.
However, the company has recently branched out to become a real estate services leader in property management, commercial lending, consulting, project management, and asset management. Close to 60% of its revenues are recurring and its margin profile continues to rise.
Yet the market does not appear to recognize its quality. Despite compounding returns by over 15% a year for the past decade, this stock only trades for 12 times earnings and 10 times free cash flow. It has an excellent management team and a fast-growing investment platform. Patient TFSA investors should be well rewarded with time.
