TFSA Investors: 2 Growth Stocks to Build an Adequate Nest Egg

Two TSX growth stocks are ideal holdings for TFSA investors building a nest egg or retirement wealth.

| More on:
A golden egg in a nest

Image source: Getty Images.

Building an adequate nest egg is possible through the Registered Retirement Savings Plan (RRSP) and Tax-Free Savings Account (TFSA). Canadians can max out their contribution limits yearly to achieve long-term financial goals.

Unfortunately, many Canadians, including the middle class, can’t fill both tax-advantaged investment accounts to the brim due to financial constraints. Many end up contributing to just one instead or the TFSA only because of the smaller contribution limit.

If you plan to build a sizeable nest egg using your TFSA, consider taking positions in two growth stocks. Nutrien (TSX:NTR) and Exchange Income (TSX:EIF) are buy-and-hold assets for wealth builders. The average dividend yield of 3.83% is decent, super-safe, and sustainable for the long haul.

Top Agri stock

Nutrien delivered record earnings in 2022, notwithstanding the unprecedented supply chain disruptions and market volatility across agriculture, energy, and fertilizer markets. The $49.2 billion potash and fertilizer company provides crop inputs and services and operates a world-class production, distribution, and retail facility network.

In the 12 months that ended December 31, 2022, total sales and net earnings rose 37% and 142% year over year to US$37.88 billion and US$7.68 billion. Ken Seitz, Nutrien’s president and chief executive officer (CEO), said, “We returned $5.6 billion to shareholders, invested in our global Retail network and advanced a number of long-term strategic initiatives that position our company for future growth and sustainability.”

Management allocated US$1.2 billion of growth capital in 2022 to advance strategic initiatives across the Retail, Potash, and Nitrogen businesses, including the Retail network expansion. Sietz added, “The outlook for our business is strong as we expect global supply issues to persist and demand for crop inputs to increase in 2023.”

Nutrien expects to reach 18 million tonnes of annual operational capability in 2026. Besides approving a share buyback (5% of Nutrien’s common shares) over 12 months, the board approved a 10% hike in the quarterly dividend. At $98.56 per share, the current dividend offer is 2.82%.

TSX’s top agriculture stock has rewarded investors with a total return of 190.69% in three years, which translates to a compound annual growth rate (CAGR) of 42.67%. Given the low 13.54% payout ratio and long growth runway, there’s plenty of room for dividend growth in the near future.

Dividend grower

Exchange Income is a suitable complement to Nutrien. The share price is $51.35 (-1.65% year to date), while the dividend yield is 4.85%. Performance-wise, the industrial stock is a winner owing to the 328.64% return in three years (62.37% CAGR). Its monthly dividend has increased 16 times since 2004.   

The $2.19 billion acquisition-oriented firm grows the business through its diversified family of companies. Management also expects them to deliver dependable returns to shareholders, regardless of the economic environment. The full-year 2022 results aren’t out yet, but the third quarter last year was among the strongest in EIC’s history.

In the third quarter of 2022, revenue and free cash flow increased 47% and 43% to $587 million and $69 million versus 2021. Notably, net earnings grew 123% year over year to $49 million.    

Long-term hold

Growth stocks Nutrien and Exchange Income are excellent options for TFSA investors building a nest egg. Apart from tax-free money growth, TFSA withdrawals in your sunset years are tax exempt.

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 Christopher Liew has no position in any of the stocks mentioned. The Motley Fool recommends Nutrien. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Happy family father of mother and child daughter launch a kite on nature at sunset
Dividend Stocks

Parents: Here’s How to Boost Your Monthly Income

Parents, you have enough to worry about. But if you can put aside even $40 per month, that can create…

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

Looking for a Reliable Retirement Income? Consider These Dividend-Paying Stocks

Investors looking to establish a reliable retirement income have no shortage of options to choose from. Here's a trio of…

Read more »

edit Person using calculator next to charts and graphs
Dividend Stocks

3 Oversold Dividend Stocks That Could Make You Rich When They Bounce Bank

Don't wait around for these oversold dividend stocks to bounce back, each certainly will, which is why now is the…

Read more »

A small flower grows out of a concrete crack.
Dividend Stocks

Down 8% Last Month, Canadian Tire Stock Is a Deal Heading Into June 2023

May wasn't a good month for the stock, but June has been different from the beginning and may present an…

Read more »

Canadian Dollars
Dividend Stocks

Need Passive Income Right Now? Turn $20,000 Into $152 Every Month

This dividend stock may be down now, but offers substantial passive income through its 9.31% dividend yield as of writing!

Read more »

Double exposure of a businessman and stairs - Business Success Concept
Dividend Stocks

Is Exchange Income Stock a Buy?

Even within an industry, some stocks might be worth considering in certain market conditions, while others may be avoided.

Read more »

Dividend Stocks

2 Top Canadian Value Stocks in June 2023

Canadian Imperial Bank of Commerce (CIBC) stock is a compelling buy in June, and so is this Canadian REIT.

Read more »

Illustration of bull and bear
Dividend Stocks

2 Cyclical Stocks to Buy Before the Next Bull Market

The TSX index has been cyclical in the past 12 months, with neither a bearish nor a bullish trend fully…

Read more »