Even though the Registered Retirement Savings Plan (RRSP) was designed exclusively for retirement savings, many Canadians prefer the more flexible Tax-Free Savings Account (TFSA) to grow their retirement savings into a viable nest egg. It’s important to note that to harness the full potential of your TFSA, it’s important to choose the right stocks to stash in the account.
An insurance company
Sun Life Financial (TSX:SLF) has grown to become much more than just an insurance company, but that’s still the dominant business of the company. About 59% of its business is individual and group insurance, while the rest is wealth and asset management.
The company has an impressive global presence and caters to 85 million clients in 28 different markets. With $1.3 trillion in assets under management, it’s one of the largest institutions in the Canadian financial sector.
From an investment perspective, Sun Life is a safe long-term holding that offers a modest mix of dividends and capital-appreciation potential. The stock has risen by about 113% in the last 10 years, and the dividends added another 100% on top, making the overall returns for the period about 213%.
It’s currently offering dividends at a healthy 4.4% yield, and since it’s an Aristocrat, the chances that payouts will keep going up in the future are quite strong.
A news and information company
Thomson Reuters (TSX:TRI) has its roots in the news business, and it has remained true to these roots, even though the scope of its business and services has expanded greatly over the years. It provides services to multiple industries, including legal, taxation, and accounting. The company offers a wide range of tech products and platforms and invests in generative artificial intelligence.
Thomson Reuters is among the blue-chip stocks in Canada. It has a massive consumer base in several different countries. The company has been growing its payouts for almost three decades, making it a well-established Aristocrat in Canada, albeit one that currently offers a modest 1.5% yield.
A far more compelling reason to consider this powerful retirement stock is its capital-appreciation potential, which pushed its value by over 338% in the last decade.
A railway company
One characteristic strength of good retirement stocks is that it represents long-term sustainability. A stock like Canadian National Railway (TSX:CNR) is a good example, since it’s such an important part of the national transportation infrastructure that its long-term sustainability potential is quite strong.
The company controls a massive railroad network that connects three major ports on the continent and transports a wide variety of cargo, including grain, fertilizer, and consumer goods.
The stock offers a good blend of dividends, growth potential, and valuation. It’s currently quite fairly valued and is offering a 2% dividend yield. The fact that it’s an established Aristocrat gives its dividends a bit more weight, but its growth potential is still its strongest characteristic. It has returned almost 200% in the last decade.
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Foolish takeaway
All three retirement stocks can give your TFSA portfolio a significant edge if they continue to perform similarly in the future. You can enhance the return potential by choosing the reinvest the payouts and can grow the size of your stake in the three companies beyond capital appreciation.
