2 Top Stocks to Supercharge Your TFSA Into a Cash Cow

IA Financial and Brookfield Renewable Partners are great passive income generators for new TFSA investors.

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TFSA (Tax-Free Savings Account) investors should continue to stick with the long-term game plan, even as broader markets continue fluctuating in both directions. Regardless of whether markets have hit bottom, TFSA investors should be all about investing for the next 10–20 years. Recessions and bear markets, as brutal as they may feel in the moment, tend to be some of the best opportunities for long-term investors to put new money to work.

Indeed, it feels bad to invest in stocks that only seem to go down. However, long-term investors know that tides turn in due time. And even the bumpiest economic landing can pave the way for a new bull market. Looking back to the 2008 Great Financial Crisis or the 2020 COVID market crash, the bottom was put in when pessimism and fear were at a high point. When it seems like things can get much worse and that nothing can improve, market valuations tend to be the most attractive. With expectations set low, it’s pretty easy for many firms to surprise to the upside.

Though stocks aren’t as cheap as they were just a few months ago, I do think there’s a good amount of value out there if you’re willing to look. In any case, the so-called excesses of the markets seem to be gone, which is a good sign for new investors looking for a decent return on investment.

As the markets inch higher again, investors should be more selective. Not everything has recovered in the same way. Other stocks have been slow to bounce this year. Whether they can make up for lost time in the second half of 2023 remains to be seen. In any case, let’s focus on fundamentals and cash-flow generation with the following two names.

IA Financial

Consider IA Financial (TSX:IAG) and Brookfield Renewable Partners (TSX:BEP.UN), two intriguing value stocks that could have room to run, even if the market’s rally is ready to stall out or reverse course!

IA Financial is an insurance and wealth management firm that’s very well run. The mid-cap $8.8 billion financial may not be the largest, most popular, or highest-yielding stock on the TSX. It may not even be the cheapest based on traditional valuation metrics like the price-to-earnings (P/E) ratio. However, I do view IA as a “wonderful” financial that’s underrated, with a multiple that’s very modest.

The stock trades at 10.9 times trailing P/E, with a 3.24% dividend yield. A decent value, but certainly nothing to pound the table over, given the fact that many bank and insurance stocks with much higher yields go for lower P/E multiples.

Still, prudence and superb managers are what you’ll get from the insurer. In such a rocky recessionary environment, I’d argue such traits are worth a premium and a spot in a TFSA.

Brookfield Renewable Partners

The Brookfield name implies stellar management and a high degree of reliability. Brookfield Renewable is a clean-energy king that used to be a high-flyer but ended up crashing back to Earth in 2021.

Today, shares are down over 33% from its all-time high just shy of $64 per share. With a 4.5% dividend yield and a 1.7 times price-to-book (P/B) multiple, Brookfield’s renewable energy play looks to be on sale. Though it is worth noting that the stock is up nearly 24% since bottoming out in December 2022. Despite this, shares are still worth stashing in a TFSA fund.

The firm is a cash cow of a company that can reward long-term investors with a good mix of passive income and appreciation. Recently, the firm announced its acquisition of Origin Energy. Brookfield expects to invest up to $750 million to bring out the best in its new assets.

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.

Fool contributor Joey Frenette has no position in any of the stocks mentioned. The Motley Fool recommends Brookfield Renewable Partners. The Motley Fool has a disclosure policy.

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