Investments into the Canadian Tax-Free Savings Account (TFSA) should ideally be for the long term. Perhaps that’s why the Canada Revenue Agency may tax your TFSA gains as trading income if you trade “too frequently.” The frequency threshold remains discretionary to the tax authorities. However, frequent trades may not be necessary if you employ a buy-and-hold investment strategy on TFSA stocks with resilient businesses, positive growth outlooks, and growing dividends.
Alimentation Couche-Tard (TSX: ATD) stock, Sun Life Financial (TSX: SLF) stock, and West Fraser Timber (TSX: WFG) stock could accelerate your retirement savings in a TFSA right now.
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Sun Life Financial
Sun Life Financial is a $40 billion insurance stock that should pay you a regular quarterly dividend that yields 4.4% annually and potentially generate steady capital growth in a TFSA portfolio for decades to come.
Simply put, insurance is a necessary financial service for personal and financial risk management. The regulated insurance business receives massive amounts of funds to manage for the unknown “rainy” days. The “free” funds earn positive interest spreads in high-interest-rate environments, and Sun Life’s wealth and asset management business remains resilient in the face of volatility. The business’s expansion into the United States is bearing fruits with a 200% year-over-year growth in reported net income from the U.S. market in the first quarter (Q1) of 2023 — driven by strong health protection cover sales.
Sun Life reported a 24% year-over-year growth in net income during the first quarter of 2023 and a strong 17.3% underlying return on equity (ROE). It raised quarterly dividends by 4.2% to mark eight consecutive years of dividend growth.
SLF stock price is up 10.6% so far this year and has delivered 216% in total shareholder returns during the past decade.
West Fraser Timber in recovery mode
West Fraser Timber is a low-cost lumber producer that’s well placed to supply in-demand wood panels to a resilient U.S. home construction market that showed surprising signs of recovery in May.
Americans are building again, and the latest housing starts data for May surprised the market. Housing starts surged by 22% month on month in May to an adjusted average of 1.6 million. Home builders are actually in demand for more lumber than the market previously anticipated.
West Fraser generated 68% of its sales from the United States in 2022. The company should see a reversal of fortunes, as demand normalizes post a slump in 2022, which was caused by record rate hikes.
WFG stock has rallied by 17.3% during the past month. Shares still trade at a price-to-book value multiple of one — or well below an industry average multiple of 1.2. West Fraser Timber stock could be undervalued.
Why should you buy West Fraser stock in a TFSA? Timber will continue to be in demand as long as Americans and Canadians continue to build new homes and renovate their older properties. People love the feel-good emotion triggered by upgrades and facelifts to their properties.
The market will eventually get accustomed to the current higher interest rate environment. The housing market will come around, and West Fraser’s timber plantations may be more valuable than they seem today.
Alimentation Couche-Tard
Alimentation Couche-Tard is a convenience store operator with a growing global coverage that has generated positive free cash flow for decades and rewarded loyal ATD stock investors with up to 594% in total returns over the past 10 years. Recent operating results point to a better future for TFSA investors who buy ATD stock today.
ATD reported a strong 40.4% year-over-year growth in net income for the fourth quarter of the fiscal year 2023 (which ended in April) to $670.7 million. Adjusted earnings of $0.71 per share were 29.1% higher than a year ago. The business’s reported return on equity for the year was a staggering 24.7%. The positive financial results pushed ATD stock more than 4% higher on Wednesday.
ATD stock should continue to generate positive shareholder returns as the company grows its business footprint through acquisitions, increases dividends, and returns more capital to shareholders through share repurchases. The company repurchased $2.3 billion worth of ATD stock during the past 12 months and raised dividends by 26.9% for 2023.
Through share repurchases, long-term investors in ATD will increase their stake in the profitable business without lifting a finger.
