Any opportunity to invest through your TFSA (Tax-Free Savings Account) should be seized. Why? I don’t know about you, but I’m not particularly fond of paying tax, and neither should you be. Well, the TFSA helps alleviate that, because any investment income earned in the account is tax free. There’s no tax reporting and no tax paying.
In 2023, Canadians can contribute $6,500 to their TFSA. Here are three top TSX stocks I’d consider buying with the contribution.
Alimentation Couche-Tard: This stock was made for a TFSA
The first stock I’d consider adding to my TFSA is Alimentation Couche-Tard (TSX: ATD). It may be a boring convenience store and gas station operator, but this stock is up a big 92% over the past three years.
Couche-Tard has been exceptionally smart about allocating capital. Whether it be investing in innovative customer experiences or consolidating a very fragmented industry, this TSX stock has demonstrated a very successful strategy. Over the past 10 years, it has compounded earnings per share by more than 19% annually.
It just announced a big acquisition that could significantly expand its reach in Europe. This was the type of acquisition that investors have been waiting for, and the stock has responded nicely. Despite, it still trades at a reasonably attractive 17 times 2023 project earnings.
Calian Group: A small-cap acquirer for your TFSA
Another stock that would make for a great TFSA investment is Calian Group (TSX: CGY). With Calian you get exposure to defence, cybersecurity, healthcare, training, and sat-com. This business is both diversified by segment and customer. However, it has a large exposure to the government sector, which provides for a very stable and growing backlog.
Over the past three years, Calian has been growing annual revenues and normalized earnings per share by 19% and 17%, respectively. Likewise, its stock has increased by 83% in that time frame.
While it only has a market cap of $755 million, it has a target to hit $1 billion of revenues in the next few years. It just announced a very intriguing sat-com acquisition, which could help propel it to this goal. At only 12 times free cash flow, it looks like a decent value to add to a TFSA today.
Colliers: Time to buy if it gets cheaper
Another great stock for a long-term TFSA hold is Colliers International Group (TSX: CIGI). Colliers is a leading international commercial real estate services firm. Many know it for its brokerage services. However, over the past few years, it has diversified into lending, property management, project management, engineering, and asset management.
Rising interest rates have been a headwind to the volume of real estate transactions around the world. This could impact Colliers near-term earnings. As a result, the stock could pullback, which would create an attractive opportunity to add this company.
Colliers stock is up over 100% over the past three years. Yet it still only trades for 13 times earnings. This stock has compounded by a high-teens rate for over two decades.
While it may face headwinds, it is an exceptional business that should only get stronger by continued smart acquisitions and a rising array of recurring services. If you can look out five or 10 years, Colliers is a great stock to buy and hold in your TFSA.
