TFSA: 3 Top TSX Stocks for Your $6,500 Contribution

Are you looking for stocks to buy with your $6,500 contribution? Here are three top TSX picks!

| More on:

A Tax-Free Savings Account (TFSA) should be used by every Canadian. This is because any gains generated in a TFSA can be withdrawn without having to pay any taxes, allowing you to snowball your account much faster. In other words, by using a TFSA, you could help accelerate your way to financial independence and allow you to retire sooner. It should be noted, however, that Canadians are limited in how much money they can contribute into one of these accounts per year.

In 2023, Canadians were given $6,500 in contribution room. That may not be the largest amount, however, your total contribution room has been accumulating since the year you turned 18. If you turned 18 in 2009 and haven’t opened a TFSA yet, then you actually have $88,000 in contribution room waiting to be used.

In this article, I’ll discuss three top TSX stocks for this year’s $6,500 contribution room.

Buy one of the Canadian banks

In my opinion, every Canadian should hold shares of at least one Canadian bank in their TFSA. This is because the Canadian banks are very well-established companies that have built reputations as strong stocks. In addition, the Canadian banking industry is highly regulated, which makes it difficult for smaller companies to displace the industry leaders.

If I could only pick one Canadian bank to hold in my portfolio, it would be Bank of Nova Scotia (TSX:BNS). What makes this company stand out among its peers, in my opinion, is its outstanding diversification. Bank of Nova Scotia has committed itself to growing in countries outside of North America. With a particular focus on the Pacific Alliance, Bank of Nova Scotia has set itself up for an exceptional growth opportunity. It’s estimated that the economies of Chile, Columbia, Mexico, and Peru could grow faster than the Canadian and American economies over the coming years.

This is a tremendous company

Constellation Software (TSX:CSU) is the second stock that investors should consider buying in their TFSA this year. This company acquires vertical market software (VMS) businesses. Upon the completion of an acquisition, Constellation Software provides the coaching and resources required for those acquisitions to become exceptional business units. Since its founding, Constellation Software has perfected its strategy and acquired hundreds of VMS businesses.

This success has been reflected in Constellation Software’s stock price. Since its initial public offering in 2006, Constellation Software stock has gained more than 14,300%. That represents a compound annual growth rate of more than 30%. Over the past year, Constellation Software stock has gained more than 24%, which suggests that the company could continue outperforming the broader market for years to come. Still led by its founder Mark Leonard, this is one company that I am very happy to hold in my own TFSA.

The stock that pays you to hold shares

Finally, investors should consider buying Fortis (TSX:FTS) in their TFSA. This company provides regulated electric and gas utilities to more than three million customers across Canada, the United States, and the Caribbean. Because of the nature of its business, Fortis can take advantage of a highly predictable and stable source of revenue. It does so by planning dividend distributions years in advance. That has allowed Fortis to maintain a dividend-growth streak of 49 years — the second-longest active streak in Canada.

Fortis has already announced its plans to continue raising its dividend through to 2027 at a rate of 4-6%. I strongly believe that Fortis will announce further increases past those years in the future. Today, Fortis offers investors a forward dividend yield of 3.80%.

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 Jed Lloren has positions in Bank Of Nova Scotia, Constellation Software, and Fortis. The Motley Fool recommends Bank Of Nova Scotia, Constellation Software, and Fortis. The Motley Fool has a disclosure policy.

More on Stocks for Beginners

a person looks out a window into a cityscape
Dividend Stocks

1 Marvellous Canadian Dividend Stock Down 11% to Buy and Hold Immediately

Buying up this dividend stock while it's down isn't just a smart move, it could make you even more passive…

Read more »

Blocks conceptualizing the Registered Retirement Savings Plan
Dividend Stocks

CPP at 70: Is it Enough if Invested in an RRSP?

Even if you wait to take out CPP at 70, it's simply not going to cut it during retirement. Which…

Read more »

worry concern
Stocks for Beginners

3 Top Red Flags the CRA Watches for Every Single TFSA Holder

The TFSA is perhaps the best tool for creating extra income. However, don't fall for these CRA traps when investing!

Read more »

Data center woman holding laptop
Dividend Stocks

Buy 5,144 Shares of This Top Dividend Stock for $300/Month in Passive Income

Pick up the right dividend stock, and investors can look forward to high passive income each and every month.

Read more »

protect, safe, trust
Stocks for Beginners

2 Safe Canadian Stocks for Cautious Investors

Without taking unnecessary risks, cautious investors in Canada can still build a resilient portfolio by focusing on safe stocks like…

Read more »

A glass jar resting on its side with Canadian banknotes and change inside.
Stocks for Beginners

How to Grow Your TFSA Well Past the Average

Need to catch up quick with your TFSA? Consider some regular contributions to this top bank stock, as well as…

Read more »

An investor uses a tablet
Stocks for Beginners

Prediction: Here Are the Most Promising Canadian Stocks for 2025

Here are three top Canadian stocks that could deliver solid returns on your investments in 2025.

Read more »

Top TSX Stocks

A 6 Percent Dividend Yield Today! But Here’s Why I’m Buying This TSX Stock for the Long Term

Want a great stock to buy? You will regret not buying this TSX stock and its decades of growth and…

Read more »