The moderation in inflation and an expected pause on interest rate hikes will likely support the equity markets. Thus, investors should utilize their Tax-Free Savings Account, or TFSA, contribution room to buy stocks and generate tax-free capital gains.
Notably, the TFSA contribution limit was increased to $6,500 in 2023 from $6,000 in 2022. Further, the cumulative contribution room increased to $88,000. Investors should focus on fundamentally strong companies and, therefore, could utilize their TFSA contribution limit to buy these three Canadian stocks.
Dollarama
Dollarama (TSX:DOL) stock offers growth and income. Further, the value price retailer’s business remains resilient to economic cycles, making it an attractive investment for your TFSA portfolio. Thanks to its low-risk business model and ability to drive traffic, Dollarama has continually delivered solid sales and earnings growth, which supports the uptrend in its stock price.
Dollarama stock has increased by over 81% in three years, reflecting an impressive CAGR (compound annual growth rate) of nearly 22%. Thanks to its profitable growth, Dollarama has consistently boosted its shareholders’ value through higher dividend payments. For instance, the company has increased its dividend 12 times since 2011.
Its broad product range at low fixed price points positions it well to drive customers amid all market conditions. Further, Dollarama’s extensive store base in the domestic market, growing footprint outside Canada, and focus on optimizing capital allocation will likely act as a catalyst.
goeasy
Subprime lender goeasy (TSX:GSY) can also be a solid addition to your TFSA portfolio near the current levels. The financial services company has been growing rapidly, with its sales and earnings increasing at a CAGR of 19.4% and 32.9%, respectively, in the last five years.
Thanks to its solid growth, goeasy stock grew at a CAGR of over 25% in the last five years, delivering a return of more than 208%. At the same time, it has enhanced its shareholders’ returns via higher dividend payouts. Goeasy has been paying a regular dividend for 19 years and increased the same for nine consecutive years.
Its comprehensive product range, large addressable market, omnichannel offerings, and high-quality loan originations augur well for future revenue growth. Meanwhile, the leverage from higher sales, stable credit performance, and efficiency savings will likely cushion its bottom line.
goeasy stock offers high growth and regular income. Meanwhile, the stock is trading cheap. goeasy is trading at a forward price-to-earnings multiple of 7.7, much lower than the historical average, providing a buying opportunity.
Telus
The final stock on this list is Telus (TSX:T), Canada’s leading telecommunications company. The company continues to deliver profitable growth and offers a solid dividend. Driven by its growing customer base, lower churn rate, and cost savings, Telus is poised to deliver strong growth and return cash to its shareholders. Also, opportunities from the expansion of its 5G services will likely accelerate its growth.
Telus has returned over $18 billion to its investors via dividends since 2004. Moreover, it is expected to grow its dividend by 7–10% annually in the coming years.
Overall, its resilient business model, a growing revenue and earnings base, 5G expansion, and a lucrative yield of 5.7% make it a solid stock for your TFSA portfolio.
