A Tax-Free Savings Account, or TFSA, is a reliable investment vehicle for creating wealth and achieving long-term financial goals, including retirement. Since the capital gains and dividends earned in a TFSA are free of tax, it boosts your real return significantly over time.
If you plan to invest for retirement and retire with peace of mind, consider leveraging the TFSA to invest in stocks. The TFSA contribution limit is $6,500 for 2023, resulting in a cumulative contribution room of $88,000. Meanwhile, investors should focus on fundamentally strong companies with solid growth prospects.
With this backdrop, I’ll discuss three Canadian stocks with the potential to outperform the broader markets and deliver significant tax-free capital gains.
Shopify (TSX:SHOP) is a must-have stock to create wealth in the long term. The e-commerce platform provider is likely to benefit from the structural shift in selling models with merchants focusing on omnichannel offerings. Further, Shopify consistently generates strong revenues, even at a large scale, which shows the strength of its business and ability to drive its GMV (gross merchandise volumes) and merchant base.
While normalization in demand post-COVID, higher interest rates, and fear of recession dragged Shopify stock lower, it has rebounded in 2023 and is up about 81% on a year-to-date basis.
Shopify’s innovative products and addition of new sales marketing channels augur well for growth and will expand its merchant base and market share. Further, its focus on easing pressure on margins and delivering sustainable profit are positives. In addition, any economic improvement, like the moderation of inflation and pause on interest rate hikes, will lift SHOP stock higher. Despite the recent rally, Shopify stock is trading at a massive discount, providing a good entry point for long-term investors.
goeasy (TSX:GSY) stock has the potential to significantly multiply its shareholders’ wealth in the coming years. The stock has witnessed a pullback, which seems unwarranted given the stellar growth in its top and bottom lines. Thanks to the recent price decline, goeasy stock offers deep value. Moreover, its ability to grow rapidly and enhance shareholders’ returns through higher dividend payouts make it an attractive long-term bet.
Barring the recent decline, goeasy stock has consistently outperformed the TSX and has grown at a CAGR (compound annual growth rate) of over 25% in the last five years. Its revenue and earnings are projected to increase at a double-digit rate. High-quality loan originations, a large subprime lending market, stable credit performance, and operating leverage will support its financials.
Thanks to its growing earnings base, goeasy has increased its dividend for nine consecutive years. Furthermore, the company is expected to grow its dividend further in the coming years.
The recent pullback in Aritzia (TSX:ATZ) stock is a solid opportunity for buying and holding this high-growth company in your portfolio. While the near-term headwinds impacting sales growth and margins could limit the upside, the stock is poised to grow significantly on the back of its solid sales and profitability.
Aritzia has grown its revenue and earnings at a double-digit rate. Further, the company is projecting that its annual sales will likely grow at a mid-teens rate for the next several years. Solid demand, full-price selling, strength in the e-commerce channel, and continued boutique expansion will likely drive its revenue in the coming years.
Impressively, management is confident that its earnings growth rate will likely exceed sales, which could give a significant lift to its share price.