Although many of us dream about retiring early, only a few of us manage to succeed due to the lack of planning. However, by setting reasonable targets and acting on them early in a career, one can reach the goal of retiring early. Meanwhile, a TFSA (tax-free savings account) is an excellent means to achieve your retirement goals, as it allows you to earn tax-free returns.
The Canadian government initiated the TFSA in 2009 to encourage Canadians to save more. It allows investors to earn tax-free returns on a specified amount called contribution room. This year’s contribution room is $6,500, while its cumulative value would be $88,000.
Meanwhile, investors should look to add stocks with solid underlying businesses, strong balance sheets, and stable cash flows to their TFSA. These companies are less susceptible to market volatility and could deliver superior returns in the long run. Here are my three top picks.
Fortis
Fortis (TSX:FTS) is involved in the energy delivery business, serving around 3.4 million customers across the United States, Canada, and Caribbean countries. The company operates regulated assets, with approximately 93% involved in electricity and natural gas transmission and distribution. So, the company is less susceptible to market volatility, thus delivering stable and reliable returns.
Over the last 20 years, the utility has delivered close to 700% returns at an impressive CAGR (compound annual growth rate) of 10.9%. Besides, the company has rewarded its shareholders by consistently raising its dividends for the previous 49 years, with its forward yield currently at 3.99%.
Meanwhile, Fortis has committed to invest around $22.3 billion from 2023 to 2027, including $5.9 billion in clean energy. These investments could grow its rate base at a CAGR of 6.2% to $46.1 billion. Supported by these rate base expansions, the company’s management hopes to increase its dividends by 4–6% annually through 2027. So, given its reliable returns, I believe Fortis would be an excellent pick for your retirement portfolio.
Waste Connections
Waste Connections (TSX:WCN) would be another reliable stock you can add to your retirement portfolio, given the essential nature of its business and stable returns. The company collects, transfers, and disposes of non-hazardous solid waste, operating primarily in secondary or exclusive markets across the United States and Canada. The waste solutions provider has been expanding its footprint through strategic acquisitions. Over the last 15 years, the company has made over $14.5 billion in acquisitions.
Supported by these acquisitions and strong organic growth, Waste Connections has posted returns of over 770% in the last 15 years at a CAGR of 15.5%. Notably, WCN has raised its dividends at a CAGR of 15% since 2010, which is encouraging. Given its solid underlying business and continued acquisitions, I expect the uptrend in the company’s financials to continue.
BCE
The demand for telecommunication services is rising due to digitization and growing remote working, learning, and shopping. So, I have selected BCE (TSX:BCE), one of Canada’s three top telecommunication players, as my final pick. The sector commands substantial initial capital investment, thus creating a huge barrier for new entrants while delivering incremental margins for existing players.
Meanwhile, BCE continues to boost its 5G and broadband infrastructure. For 2023, the company’s management expects its capital investments to be 19–20% of its operating revenue. Supported by these investments, the company hopes to cover 85% of the Canadian population with 5G service while adding 650,000 new broadband connections. The growing demand and solid infrastructure could boost the company’s financials in the coming years, thus allowing it to deliver superior returns. Besides, it has raised its dividends by over 5% every year for the previous 15 years, with its forward yield currently at 6.44%.
