Investing in a Tax-Free Savings Account (TFSA) could help the everyday Canadian achieve financial freedom. This is because, as its name suggests, any gains generated in a TFSA aren’t subject to income tax. That allows investors to snowball their accounts much quicker than they’d be able to in a regular taxable account.
In this article, I’ll discuss three top stocks that investors should consider holding in their TFSA.
This is a top stock
When it comes to stocks that could help investors achieve financial freedom, few companies can compare to Constellation Software (TSX: CSU). Since its initial public offering (IPO), this stock has gained about 15,000%. That means an investment of $10,000 at its IPO would be worth more than $1,000,000 today. Despite those tremendous gains, relatively few Canadians are even aware that this company exists.
The reason this company isn’t very well known is because Constellation Software’s business isn’t consumer facing. Instead, it operates in the background, acquiring vertical market software companies. Constellation Software’s playbook has been so successful that the company has needed to become aware of copycat businesses that are trying to emulate its success.
It’s worth noting that Constellation Software’s founder, Mark Leonard, continues to lead this company. As long as that stays true, I would be very comfortable investing in Constellation Software stock.
Another great stock for your portfolio
Alimentation Couche-Tard (TSX: ATD) is another great stock worth considering in a TFSA. This company may not have the flashiest business in the world; however, it is a staple within Canadian communities. For those that don’t recognize this company, note that it also operates under several banners, including On the Run, Daisy Mart, Circle K, and many more. Yes, Alimentation Couche-Tard operates convenience stores. In fact, it operates more than 14,000 locations across the world.
Like Constellation Software, Alimentation Couche-Tard has been very successful since its IPO. Since December 1999, this stock has gained more than 14,600%. Over the past five years, the stock has risen about 150%. That performance greatly outpaces the broader market over both investment periods. With convenience stores continuing to provide just that, convenience, I believe Alimentation Couche-Tard’s business could continue to thrive over the coming years.
Consider this renewable energy company
It’s no secret that renewable energy continues to increase its penetration of the global energy industry. That’s why I think Brookfield Renewable (TSX: BEP.UN) is worth considering in your TFSA today. This company operates a diversified portfolio of assets capable of generating 25 gigawatts (GW) of renewable energy. That makes it one of the largest produces of renewable energy in the world.
It should be noted that Brookfield Renewable has a large development pipeline. With 110 GW of generation capacity along various stages of construction, Brookfield Renewable could cement its position atop the renewable energy space.
What attracts me to Brookfield Renewable is its excellent history of capital appreciation and dividend increases. Since inception, Brookfield Renewable stock has generated an annualized return of about 15%. In addition, the company has managed to increase its dividend distribution at a compound annual growth rate of 6% over the past 11 years. In my opinion, this stock should be appealing to growth and dividend investors alike.
