Amid the increased optimism over the passage of the debt ceiling bill and strong job growth in the United States, the Canadian benchmark index, the S&P/TSX Composite Index, rose 2.8% this month. However, concerns over the impact of prolonged higher interest rates on global growth and inflation still persist. Considering all these factors, I believe investors should utilize their $6,500 TFSA (tax-free savings account) contribution room to buy the following three TSX stocks.
Dollarama (TSX:DOL), a discounted retailer, would be one of the top TSX stocks to add to your TFSA in this inflationary environment. With rising prices curtailing consumer spending, more cost-sensitive customers are visiting Dollarama stores, thus driving sales. Meanwhile, the company today reported impressive first-quarter performance for fiscal 2024, which ended on April 2023.
Its total sales grew by 20.7% to $1.3 billion amid solid same-store sales growth of 17.1% and a net addition of 76 stores over the last 12 months. Adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) and diluted EPS (earnings per share) also grew by 22.1% and 28.6%, respectively.
Given the sticky inflation and Dollarama’s continued store expansion, I expect the uptrend in its financials to continue. For 2024, the company expects to open 60-70 new stores while driving its same-store sales growth by 5-6%. The company also pays a quarterly dividend of $0.0708/share.
On Sunday, Saudi Arabia announced that it would slash its production by 1 million barrels per day from July amid macroeconomic concerns, including the slower-than-expected recovery in Chinese demand and a potential recession. Meanwhile, earlier this year, OPEC (Organization of the Petroleum Exporting Countries) and its allies cut production by 1.7 billion barrels per day in April.
With the Federal Reserve likely to pause its interest rate hikes, a recovery in Chinese demand could drive oil prices higher in the second half of this year amid these severe production cuts. Meanwhile, some analysts even expect oil prices to touch US$100/barrel, thus benefiting oil-producing companies, including Suncor Energy (TSX:SU). Supported by its long-life, low-decline assets, the company incurs $30-$43 of expenses in producing one barrel of oil. So, with oil prices trading substantially above these levels and projected to rise further, I expect the company to post solid performances in the coming quarters, thus driving its stock price.
NorthWest Healthcare Properties REIT
With a dividend yield of 10.58%, NorthWest Healthcare Properties REIT (TSX:NWH.UN) would be my final pick. The company owns and operates a highly defensive portfolio of 233 healthcare properties, covering a total gross leasable area of 18.6 million square feet. Meanwhile, the company enjoys a higher occupancy rate due to its long-term lease agreements and government-backed tenants. Besides, with around 83% of its rent indexed to inflation, the company is well-positioned to deal with the inflationary environment.
However, NorthWest Healthcare has witnessed a substantial sell-off over the last few months. The temporary increase in its leverage and rising interest rates severely dented its first-quarter AFFO (adjusted fund from operations), weighing on its stock price. The company plans to generate $550-$600 million through non-core asset sales and lower its stake in the United States and United Kindom joint ventures, which it intends to utilize to pay off its higher interest-bearing debt. Along with these initiatives, its disciplined investments could boost the company’s AFFO by 20% this year, thus making its future payouts safer.